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Page 1 CPT Section C General Economics Unit 2 Ms. Anita Sharma Page 2 CPT Section C General Economics Unit 2 Ms. Anita Sharma MCQs for Ordinal Approach Page 3 CPT Section C General Economics Unit 2 Ms. Anita Sharma MCQs for Ordinal Approach MCQ.1:Indifference analysis is based on the idea of a) Law of DMU b) Ordinal Utility c) Cardinal Utility d) None Answer: (b) Page 4 CPT Section C General Economics Unit 2 Ms. Anita Sharma MCQs for Ordinal Approach MCQ.1:Indifference analysis is based on the idea of a) Law of DMU b) Ordinal Utility c) Cardinal Utility d) None Answer: (b) MCQ.2; MRS is the rate at which the consumer is willing to substitute one good for another without changing the level of _____. a) income b) price c) satisfaction d) none Answer: (c) Page 5 CPT Section C General Economics Unit 2 Ms. Anita Sharma MCQs for Ordinal Approach MCQ.1:Indifference analysis is based on the idea of a) Law of DMU b) Ordinal Utility c) Cardinal Utility d) None Answer: (b) MCQ.2; MRS is the rate at which the consumer is willing to substitute one good for another without changing the level of _____. a) income b) price c) satisfaction d) none Answer: (c) MCQ.3:Two ICs never intersect each other because a) they can’t be close to each other b) they represent different levels of satisfaction c) both d) None Answer: (b)Read More
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FAQs on MCQ - Theory of Consumer Behavior - Business Economics for CA Foundation
| 1. What is the theory of consumer behavior? |  |
Ans. The theory of consumer behavior is a branch of microeconomics that explains how individual consumers make decisions to allocate their spending on various goods and services to maximize their satisfaction or utility. It studies the preferences, choices, and budget constraints of consumers to understand their behavior in the market.
| 2. What are the key assumptions of the theory of consumer behavior? | |
Ans. The theory of consumer behavior makes the following key assumptions:
1. Rationality: Consumers are rational and aim to maximize their utility or satisfaction.
2. Preferences: Consumers have consistent preferences for goods and services.
3. Budget constraint: Consumers face a budget constraint that limits their spending.
4. Diminishing marginal utility: The marginal utility of a good decreases as the consumer consumes more of it.
5. Substitution effect: Consumers can substitute one good for another to maintain their level of utility.
| 3. What is utility in the theory of consumer behavior? | |
Ans. Utility is a measure of the satisfaction or pleasure a consumer derives from consuming a good or service. In the theory of consumer behavior, the goal of the consumer is to maximize their utility or satisfaction. Utility is subjective and varies from person to person. The theory assumes that consumers can rank their preferences for goods and services and choose the combination that gives them the highest utility within their budget constraint.
| 4. How does the theory of consumer behavior explain the demand curve? | |
Ans. The theory of consumer behavior explains the demand curve as a reflection of consumer behavior in the market. The demand curve shows the relationship between the price of a good and the quantity demanded by consumers. According to the theory, as the price of a good increases, the quantity demanded by consumers decreases due to the substitution effect and income effect. The substitution effect occurs when consumers switch to a cheaper alternative when the price of a good increases, while the income effect occurs when the purchasing power of consumers decreases due to a price increase.
| 5. What are the limitations of the theory of consumer behavior? | |
Ans. The theory of consumer behavior has the following limitations:
1. It assumes that consumers are rational, which may not always be the case in reality.
2. It assumes that consumers have complete information about the goods and services they consume, which may not be true in the real world.
3. It does not consider the influence of social norms, cultural factors, and advertising on consumer behavior.
4. It assumes that consumers have consistent preferences, which may change over time or in different situations.
5. It does not account for the impact of external factors such as government policies, taxes, and subsidies on consumer behavior.
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