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# Scanner Chapter - Indifference Curve, Micro Economics, Class 12 Commerce Notes | EduRev

## Economics for CBSE Class 12 Board Examinations

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## Commerce : Scanner Chapter - Indifference Curve, Micro Economics, Class 12 Commerce Notes | EduRev

The document Scanner Chapter - Indifference Curve, Micro Economics, Class 12 Commerce Notes | EduRev is a part of the Commerce Course Economics for CBSE Class 12 Board Examinations.
All you need of Commerce at this link: Commerce

N.C.E.R.T QUESTIONS
(Q1) What do you mean by the budget set of a consumer ?

(Q2) What is budget line?

(Q3) Explain why the budget line is downward sloping.

(Q4) 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 equcation 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?

(Q5) How does the budget line change if the consumer’s income increases to Rs 40 but the
prices remain unchanged?

(Q6) How does the budget line change if the price of good 2 decreases by a rupee but the price
of good 1 and the consumer’s income remain unchanged?

(Q7) What happens to the budget set if both the prices as well as the income double ?

(Q8) 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 ?

(Q9) Show diagrammatically consumer’s equilibrium using indifference curve analysis.

(Q10) What do you mean by ‘monotonic preferences’?

(Q11) If a consumer has monotonic preferences, can she be indifferent between the bundles
(10, 8) and (8, 6)?

(Q12) Suppose your friend is indifferent to the bundles (5, 6) and (6, 6). Are the preferences of

(Q13) A consumer spends his entire income on food and clothing. Draw the budget line for each of the following situations, identifying the intercepts and slopes in each case (measure food consumption on horizontal axis).
(a) Monthly income is Rs. 5,000. The price of food is Rs. 100 and of clothing is Rs. 250.
(b) Same condition as in part (a), except that income is Rs. 4,000.

(Q14) Navin’s budget line relating to good X and good Y has intercepts of 150 units of X and
120 units of Y. If the price of good X is Rs. 12,
(a) What is Navin’s money income ?
(b) What is the price of good Y?
(c) What is the slope of the budget line?

(Q15) Explain consumer’s equilibrium with the help of Indifference Curves. Vandana spends her entire monthly income of Rs. 600 on two commodities X and Y. The price of X is Rs. 30 and price of Y is Rs. 10. If the consumes 12 units of X and 24 units of Y, her MRS is (1Y/1X). Is she in equilibrium at this point on her budget line ?

(Q16) Suppose that the price of a commodity Y is Re.1 per unit and the price of commodity X is Rs.2 per unit. Suppose further that an individual’s money income is Rs. 16 per time period and all is spent on X and Y.
(i) Draw the Budget Line for the consumer.
(ii) Find the slope of the Budget Line.
(iii) Write the equation of the Budget Line.

(Q17) Sanjiv’s budget line relating to good X and good Y has intercepts of 40 units of good X and 20 units of good Y. If the price of the good X is Rs. 8; what is Sanjiv’s income ? Calculate the price of good X and slope of the budget line.

(Q18) Distinguish between attainable (or feasible) and non-attainable (or non-feasible) combinations of a set of two goods. Draw a suitable diagram.

CBSE 2010 + SAMPLE PAPER QUESTIONS

(Q1) Define a budget line.

(1M)

(Q2) Define an indifference curve.

(1M)

(Q3) Define an indifference map.

(1M)

(Q4) What are the conditions of consumer’s equilibrium under the indifference curve approach
? What changes will take place if the conditions are not fulfilled to reach equilibrium ?

(6M)

(Q5)
(a) What is a budget line? What does the point on it indicate in terms of prices?
(b) A consumer consumes only two goods X and Y. Her money income is Rs 24 and the prices
of Goods X and Y are Rs 4 and Rs 2 respectively. Answer the following questions:
(i) Can the consumer afford a bundle 4X and 5Y ? Explain
(ii) What will be the MRSXY when the consumer is in equilibrium? Explain.

(6 M)

CBSE 2011 & CBSE 2012

(Q1) Define a budget line.

(1 mark)

(Q2) Define a budget line. When can it shift to the right ?

(4 marks)

(Q3) What is budget set ? Explain what can lead to change in budget set.

(4 marks)

(Q4) Explain the concepts of (i) marginal rate of substitution and (ii) budget line equation with
the help of numerical examples.

(6 marks)

(Q5) Explain any three properties of Indifference Curves.

(6 marks)

(Q6) Explain the conditions of consumer’s equilibrium with the help of the Indifference Curve
Analysis.

(6 marks)

(Q7) Explain the concept of Marginal Rate of substitution . Explain the reaction of the consumer
when Marginal Rate of substitution is higher than the ratio of prices

(6M)

(Q8) Explain the difference between cardinal utility and ordinal utility. Give example in each
case.

(6 marks)

(Q9) Explain the concept of Marginal Rate of substitution by giving an example . What happens to MRS when consumer moves downwards along the indifference curve ? Give reasons for your answer.

CBSE (D) 2011

(Q10) What are Monotonic preferences ? Explain why is an indifference curve
(i) Slopes downward from left to right
(ii) Convex

CBSE (D) 2011

(Q11) What are monotonic preferences ? Explain why an indifference curve to the right shows
higher utility.

(F)

(Q12) State true or false
(a) A budget set is the collection of all bundles of goods that a consumer wants to buy
(b) A budget set is the collection of such bundles of goods that give same satisfaction

C.B.S.E & SAMPLE PAPER 2013

(Q1) Explain the meaning of diminishing marginal rate of substitution with the help of a
numerical example.

(3 M)

(Q2) Explain three properties of indifference curves.
OR
Explain the conditions of consumer’s equilibrium under indifference curve approach.

(6 M)

(Q3) What is a budget line ? Why is it downward sloping ?

(3 M)

(Q4) Why is an indifference curve convex towards the origin ? Explain.

(3 marks)

(Q5) A consumer consumes only two goods. For the consumer to be in equilibrium why must
Marginal Rate of Substitution between the two goods must be equal to the ratio of prices of
these two goods ? Is it enough to ensure equilibrium ?

(6 M)

(Q6) A consumer consumes only two goods. Why is the consumer said to be in equilibrium
when he buys only that combination of the two goods which lies at that point on the Indifference
curve where the budget line is tangent to the indifference curve ? Explain. Use diagram

(6 M)

C.B.S.E PAPER 2014

(Q1) Define indifference curve.

(1M)

(Q2) What is meant by monotonic preferences.

(1M)

(Q3) Explain why is an indifference curve (a) downward sloping and (b) convex.
OR
Explain the concept of ‘Marginal Rate of Substitution’ with the help of a numerical example. Also
explain its behaviour along an indifference curve.

(6M)

(Q4) Explain the conditions of consumer equilibrium under indifference curve analysis.

(6 M)

(Q5) State the conditions of consumer’s equilibrium in the Indifference Curve Analysis and
explain the rationale behind these conditions.

(6M) (F)

(Q6) Explain the distinction between equations of budget line and budget constraint. (c)

SAMPLE PAPER 2015

(Q1) Explain why an indifference curve is convex to the origin ?

(4 M)

OR
A consumer consumes two goods X and Y. What will happen if MUx/Px is greater than MUy / Py
(Q2) A consumer consumes only two goods. Explain the conditions that need to be satisfied for
the consumer to be in equilibrium under indifference curve analysis.

(6 M)

C.B.S.E PAPER 2015

(Q1) A consumer consumes only two goods . If the price of the goods falls , the indifference
curve (a) Shift upwards (b) Shifts downards
(c) Can shift both upwards or downwards (d) does not shift

(Q2) Define budget line.

(1 M)

(Q3) Define Indifference Map.

(1 M)

(Q4) Define indifference curve.

(1 M)

(Q5) A consumer consumes only two goods X and Y, both priced at Rs. 2 per unit. If the consumer chooses a combination of the two goods with Marginal Rate of Substitution equal to 2, is the consumer in equilibrium ? Why or why not ? What will a rational consumer do in this situation ? Explain.

(Q6) A consumer consumes only two goods, each priced at rupee one per unit. If the consumer chooses a combination of the two goods with marginal rate of substitution equal to 2, is the consumer in equilibrium? Give reasons. Explain what will a rational consumer do in this
situation.

(Q7) A consumer consumes only two goods X and Y both priced at Rs.3 per unit. If the consumer
chooses a combination of these two goods with marginal rate of substitution equal to 3, is the
consumer in equilibrium ? Give reasons. What will a rational consumer do in this situation?
Explain.

(D)

(Q8) ‘Higher indifference curve represents higher level of satisfaction to the consumer’. Explain
the statement, also state the underlying assumption related to this property of indifference
curve.

[SP (4M)]

(Q9) Show diagrammatically the conditions for consumer’s equilibrium, in Hicksian analysis of
demand.

[SP (6M)]

(Q10) Give equation of budget line.

(D)

(Q11) Give equation of budget set.

(D)

(Q12) If marginal rate of substitution is constant throughout, the indifference curve will be : (choose
the correct alternative)

(D)

(a) parallel to the X-axis (b) downward sloping concave
(c) downward sloping convex (d) downward sloping straight line

(Q13) A consumer consumes only two goods. If price of one of the goods falls, the indifference
curve: (choose the correct alternative)

(F)

(a) shifts upwards (b) shifts downwards
(c) can shift both upwards or downwards (d) does not shift

(Q14) If Marginal Rate of Substitution is increasing throughout, the Indifference Curve will be :
(Choose the correct alternative)

(1 M)

(a) Downward slopping convex (b) Downward sloping concave
(c) Downward sloping straight line (d) Upward sloping convex

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