Class 12 Micro Economics - Chapter Theory of Consumer Behaviour NCERT Solutions | What do you mean by substitutes? Give ex

A consumer wants to consume two goods. The prices of the two goods are Rs 4
and Rs 5 respectively. The consumer’s income is Rs 20.
(i) Write down the equation of the budget line.
(ii) How much of good 1 can the consumer consume if she spends her entire
income on that good?
(iii) How much of good 2 can she consume if she spends her entire income on
that good?
(iv) What is the slope of the budget line?
Questions 5, 6 and 7 are related to question 4.

Suppose your friend is indifferent to the bundles (5, 6) and (6, 6). Are the preferences of your friend monotonic?

What is budget line?

Suppose there are 20 consumers for a good and they have identical demand functions: 

d(p)=10–3pd(p)=10–3p for any price less than or equal to 103103 and d1(p)=0d1(p)=0 at any price greater than 103.

Consider the demand curve D (p) = 10 – 3p. What is the elasticity at price 53?

What do you mean by an ‘inferior good’? Give some examples

Suppose a consumer wants to consume two goods which are available only in
integer units. The two goods are equally priced at Rs 10 and the consumer’s
income is Rs 40.
(i) Write down all the bundles that are available to the consumer.
(ii) Among the bundles that are available to the consumer, identify those which cost her exactly Rs 40.

Explain why the budget line is downward sloping.

Suppose a consumer’s preferences are monotonic. What can you say about her preference ranking over the bundles (10, 10), (10, 9) and (9, 9)?

Suppose a consumer can afford to buy 6 units of good 1 and 8 units of good 2
if she spends her entire income. The prices of the two goods are Rs 6 and Rs 8
respectively. How much is the consumer’s income?

Explain the concept of a production function

What would be the shape of the demand curve so that the total revenue curve is?

(a) A positively sloped straight line passing through the origin?

(b) A horizontal line?

Explain market equilibrium.

Discuss the central problems of an economy.

What are the characteristics of a perfectly competitive market?

What is the total product of input?

From the schedule provided below calculate the total revenue, demand curve and the price elasticity of demand:

When do we say that there is an excess demand for a commodity in the market?

What do you mean by the production possibilities of an economy?

How are the total revenue of a firm, market price, and the quantity sold by the firm related to each other?

What is the relation between market price and average revenue of a price-taking firm?

A shift in demand curve has a larger effect on price and smaller effect on quantity when the number of firms is fixed compared to the situation when free entry and exits is permitted. Explain.

What is the law of diminishing marginal product? 

At which point does the SMC curve intersect the SAC curve? Give a reason in support of your answer. 

Explain through a diagram the effect of a rightward shift of both the demand and supply curves on equilibrium price and quantity.

What will happen if the price prevailing in the market is?

i. Above the equilibrium price

Ii. Below the equilibrium price

What are the characteristics of a perfectly competitive market?

When does a production function satisfy constant returns to scale?

Explain how price is determined in a perfectly competitive market with a fixed number of firms.

What do the long-run marginal cost and the average cost curves look like?