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INDIAN SCHOOL AL WADI AL KABIR
CONSUMER EQUILIBRIUM AND DEMAND
1. Define utility?
2. If with rise in price of good Y , demand for good X rises, the two goods are;
3.
4.
5.
6.
7.
a. Substitutes
b. Complements
c. Not related
d. Jointly demanded
A consumer consumes only two goods. If price of the goods falls, the indifference curve;
a. Shifts upwards
b. Shifts downwards
c. Can shift both upwards or downwards
d. Does not shift
A consumer spends Rs 400 on a good priced at Rs 4 per unit. When the price rises by 25%,
the consumer continues to spend Rs 400. Calculate the price elasticity of demand by
percentage method.
Price elasticity of supply of a good is 2, it shows that;
a. When supply rises by 1%,price rises by 2%
b. When supply falls by 1%, price rises by 2%
c. When price rises by 1% , supply rises by 2%
d. When price falls by 1%, supply rises by 2%
On account of a fall in the price of crude oil in the international market, price of diesel has
fallen in the domestic market. What kind of change in terms of the budget line of; given
consumer will take place, who spends his entire income on goods X and Y, of which X is
diesel? Explain.
Derive the law of demand from the single commodity equilibrium – Marginal Utility =
Price.(HOTS)
8. if price of salt and coffee increase by the same proportion, will their quantity demanded also behave
in the same manner?(HOTS)
9. government reduces railway fare between two zones A & B .this will lead to ;
a.
b.
c.
d.
downward movement on its demand curve
rightward shift of its demand curve
leftward shift of its demand curve
upward movement on its demand curve
10. Explain the meaning of equilibrium.
11. Explain the concept of marginal utility by giving a numerical example.
12. State and explain the Law of diminishing marginal utility with the help of a numerical
example.
13. Explain the conditions of equilibrium assuming that consumer consumes only two goods.
14. Given price of a good, how does a consumer decide as to how much of that good to buy?
15. A consumer consumes only two goods X and Y and is in equilibrium. Price of x falls.
Explain the reaction of the consumer through the utility analysis.
16. Explain consumer’s equilibrium with the help of indifference curve analysis. Use diagram.
17. What is meant by demand in economics?
18. What is law of demand?
19. Define the following’
a. Normal good
b. Inferior good
c. Substitute good
d. Complementary good
20. Explain the inverse relationship between price and quantity demanded of a commodity.
21. Distinguish between a normal good and an inferior good. Give examples.
22. Goods X and Y are substitutes. Explain the effect of fall in price of Y on demand for X.
23. Explain the distinction between ‘change in demand’ and ‘change in quantity demanded’.
24. Distinguish between individual demand curve and market demand curve.
25. Explain how rise in income of a consumer affects the demand of a good. Give examples.
26. Why does a demand curve slope downwards? Explain.
27. Explain the relationship between
a. prices of other goods and demand for the given good.
b. income of the buyers and demand for a good.
28. Explain two causes of ‘decrease’ in demand for a commodity.
29. Which of the following commodities have inelastic demand? Give reason.
Salt, a particular brand of lipstick, medicine, mobile phone and school uniform.
30. Draw and explain the different types of price elasticity of demand.
31. Explain the geometric method of measuring price elasticity of demand.
32. If a good can be used for many purposes, the demand for it will be elastic. Why?
33. How does the availability of close substitutes of a good affect the price elasticity of demand
of that good? Explain.
34. ‘’ if a product price increases, a family s spending on the product has to increase.’’ Defend
or refute.
35. Draw a negatively sloped straight line demand curve joining two axes. How is price
elasticity of demand measured at a given point on the demand curve?
36. Explain the relationship between price elasticity of demand and total expenditure with the
help of a table.
37. Explain the factors affecting the magnitude of price elasticity of demand.
38. Ice cream sells for Rs.20.Rita who likes ice-cream, has already consumed 4. Her MU of one
rupee is 4. Should she consume more ice-cream or stop the consumption?
39. Total utility is maximum when
A .MU=1
b. MU=0
C. MU is positive
d. MU is negative
40. Total utility increases at an increasing rate when marginal utility;
a. Decreases
b. Increases
c. Stays constant
d. Becomes negative
41. Distinguish between cardinal utility and ordinal utility.
42. Why is an indifference curve strictly convex? Explain.
43. Distinguish between budget set and budget line. Use diagram.
44. Explain the properties of indifference curves.
45. A budget set is a collection of such bundles of goods that give same satisfaction. True or
false? Give reasons.
46. A demand curve shifts due to change in;
a.Tastes
b. Income
c. Price of the related goods
d. All the above
47. Spot the inferior good;
a. Wheat
b. Bajra
c. Rice
d. None of the above.
48. Distinguish between change in demand and change in quantity demanded of a commodity.
49. State three causes for a rightward shift of a demand curve.
50. There is a mass campaign against consuming tobacco in the country. Explain and show
graphically, its likely impact on market demand for tobacco.
51. Government aims at discouraging consumption of junk food but only through the market
.what, any one, option is available to the government to influence the market demand for
junk food. Explain.
52. A consumer buys 80 units of a good at a price of Rs.4 per unit. When the price falls, he buys
100 units. If PED is (-) 1, find out the new price.
53. Price of a good falls from Rs.10 to Rs.8. as a result its demand raises from 80 units to 100
units. What can you say about PED by considering total expenditures?
54. A 5 % fall in the price of x leads to a 10% rise in demand for x . a 2% rise in the price of y
leads to a 6% fall in demand for y. calculate the PED of x and y.
55. Draw a downward sloping straight line demand curve. Indicate the points on this demand
curve, where Ep = 0, Ep = 1, Ep =infinity.
56. Why is demand for water inelastic?
57. PED measure shows;
a. Response of price to change in demand
b. Response of demand to change in price
c. Degree of response of price to change in demand.
d. Degree of response of demand to change in price.
58. Whether demand for luxuries is elastic or inelastic?
59. “If a product price increases, a family‘s spending on the product has to increase”. Defend or
refute.
60. How is PED affected by;
a.Number of substitutes available for the good.
b. nature of the good.