Theory of Consumer Behaviour quiz

When total utility is maximum, marginal utility is:

The slope of the budget line p1x1 + p2x2 = M is:

Indifference curves are convex to the origin because of:

An increase in income with prices constant causes the budget line to:

If the price of tea rises, the demand for coffee will:

Demand for an inferior good falls when:

If a 10% fall in price leads to a 5% rise in quantity demanded, demand is:

The price elasticity of demand on a vertical demand curve is:

At the consumer's optimum:

Petrol and cars are examples of:

Why does the demand curve slope downward? Give two reasons. (2 marks)

Why do two indifference curves never intersect? (2 marks)

What is meant by monotonic preferences? (2 marks)

Distinguish between a budget set and a budget line. (2 marks)

What happens to the budget line if both prices and income double? (2 marks)

What is the elasticity of demand at the midpoint of a straight line demand curve? (2 marks)

How is market demand derived from individual demand? (2 marks)

Explain the relationship between TU and MU. (2 marks)

Why is the demand for necessities inelastic? (2 marks)

What is meant by contraction of demand? (2 marks)

A consumer has income of Rs 120. The prices of goods 1 and 2 are Rs 6 and Rs 4. Find the maximum quantities of each good and the MRS at the optimum. (3 marks)

The price elasticity of demand for a good is 2. If its price rises by 10%, calculate the percentage fall in quantity demanded. If the initial demand is 500 units, find the new demand. (3 marks)

Two consumers have demand functions d1 = 10 - p and d2 = 15 - 2p. Find market demand at p = 5 and p = 8. (3 marks)

When the price of a good falls from Rs 20 to Rs 15, quantity demanded rises from 30 to 50 units. Calculate the total expenditure before and after and the price elasticity by the percentage method. Is demand elastic? (3 marks)

A consumer buys a good priced at Rs 6. The MU of money is 1 util per rupee. MU of successive units is 10, 8, 6 and 4 utils. How many units will the consumer buy? Explain. (3 marks)

Read the passage and answer the questions. Riya has Rs 60 to spend on samosas (Rs 10 each) and juice (Rs 15 each). She buys a bundle on her budget line where her indifference curve is tangent to it. (i) Write the budget line equation. (ii) What is the MRS at her optimum? (iii) Name two bundles on her budget line. (5 marks)

Read the passage and answer the questions. When incomes in a village rose, families bought less coarse grain and more rice and wheat. (i) Classify coarse grain and rice. (ii) Draw the shift in demand for coarse grain. (iii) Is this a movement along or shift of the demand curve? (5 marks)

Read the passage and answer the questions. A metro rail company reduced fares by 20% and found that ridership increased by 40%, raising its revenue. (i) Calculate the price elasticity of demand. (ii) Is demand elastic? (iii) Why did revenue rise? (5 marks)

Read the passage and answer the questions. The price of salt doubled in a town, but households bought almost the same quantity as before. (i) What is the nature of demand for salt? (ii) Give two reasons. (iii) What is the effect on household expenditure on salt? (5 marks)

Read the passage and answer the questions. When the price of printers fell, the demand for printer ink cartridges increased, while the demand for typing services fell. (i) Identify the relationship between printers and cartridges. (ii) Identify the relationship between printers and typing services. (iii) Draw the shift in demand for cartridges. (5 marks)

Explain consumer's equilibrium under the utility approach for one and two goods, with schedules. (6 marks)

Explain the consumer's equilibrium using the indifference curve approach with a diagram. (6 marks)

Explain the budget line and the changes in it due to changes in income and prices with diagrams. (6 marks)

Explain the determinants of demand and the difference between movement along and shift of the demand curve with diagrams. (6 marks)

Explain the measurement of price elasticity of demand by the percentage method and the geometric method, with diagrams of different degrees of elasticity. (6 marks)