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Commerce Exam  >  Commerce Notes  >  Economics Class 11  >  Higher Order Thinking Skills - Consumer's Equilibrium and Demand (Theory of Consumer Behaviour) | Economics Class 11 - Commerce PDF Download

Higher Order Thinking Skills - Consumer's Equilibrium and Demand (Theory of Consumer Behaviour) - Economics Class 11 - Commerce PDF Download

HOTS QUESTIONS

Q1. Give the formula for calculating the slope of the budget line.
 Ans:  It is equal to the ratio of the prices of the two commodities , i.e.,  Px / Py

Q2. Suppose a consumer's preferences are monotonic. What can you say about his preference ranking over the bundles (10,10),(10,9) and (9,9)?
 Ans:  Consumer will monotonically prefer bundle (10,10) to (10,9) and (9,9) and also prefer bundle (10,9) to (9,9)

Q3. A rise in the income of the consumer leads to a fall in the demand for commodity 'x'. What type of good is commodity 'x'?
 Ans:  Inferior good

Q4. What do you mean by substitute and complementary goods? Give two examples each.
 Ans:  Substitute goods are those goods which can be used in place of each other. Ex. Tea and Coffee. Complementary goods are those goods which are used together to satisfy a given want. Ex : Car and petrol. 

Q5. Mention one factor that causes a leftward shift of the demand curve.
 Ans: Fall in income of  a consumer.

Q6. What causes a movement along the demand curve of a commodity?
 Ans:  When the price of a commodity changes and other factors remain constant, there will be movement along the demand curve.

Q7. What is demand function?
 Ans: - A demand function shows the functional relationship between the quantity demanded and the factors on which demand depends on.

Q8. Draw a demand curve with unitary elasticity.

Higher Order Thinking Skills - Consumer`s Equilibrium and Demand (Theory of Consumer Behaviour)

Q9. Define price elasticity of demand.
 Ans:  It refers to the degree of responsiveness of quantity demanded to change in price.

Q10. Is the demand for the following elastic, moderate elastic, highly elastic? Give reasons.
i. Demand for petrol
ii. Demand for text books
iii. Demand for cars
iv. Demand for milk
Ans:- i) Demand for petrol is moderately elastic , because when the price of the petrol goes up , the consumer will reduce the use of it.
ii)Demand for text books is completely inelastic. In case of text books, even a substantial change in price leaves the demand unaffected.
iii) Demand for cars is elastic. It is a luxury good, when the price of the car rises, the demand for the car comes down.
iv) Demand for milk is elastic, because price of the milk increases then the consumer purchase less quantity milk.

Q11. What is the relationship between slope and elasticity of a demand curve?
Ans: The formula of Ed = ΔQ / ΔP * P / Q
The formula for the slope of the demand curve is, slope = ΔP / ΔQ
The relationship between slope and elasticity of demand is Ed= 1/slope * P/Q

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FAQs on Higher Order Thinking Skills - Consumer's Equilibrium and Demand (Theory of Consumer Behaviour) - Economics Class 11 - Commerce PDF Download

1. What is consumer's equilibrium in the context of the Theory of Consumer Behaviour?
Ans. Consumer's equilibrium refers to the situation where a consumer maximises their satisfaction given their budget constraints. It occurs when the consumer has allocated their income in such a way that the marginal utility per unit of currency spent on each good is equal. This means that the last unit of currency spent on each good provides the same level of satisfaction, ensuring optimal consumption choices.
2. How does the concept of utility relate to consumer's equilibrium?
Ans. Utility represents the satisfaction or pleasure derived from consuming goods and services. In the context of consumer's equilibrium, a consumer seeks to maximise total utility within their budget. The equilibrium is reached when the marginal utility of the last unit consumed of each good equals its price, allowing the consumer to achieve the highest possible level of satisfaction with their available resources.
3. What factors influence a consumer's demand for a product?
Ans. Several factors influence a consumer's demand for a product, including the price of the product, consumer income, preferences and tastes, the prices of related goods (substitutes and complements), and consumer expectations regarding future prices and availability. Changes in any of these factors can lead to shifts in the demand curve, affecting the quantity demanded at various price levels.
4. Explain the concept of diminishing marginal utility and its significance in consumer behaviour.
Ans. Diminishing marginal utility is the principle that as a consumer consumes more units of a good, the additional satisfaction (utility) gained from each subsequent unit tends to decrease. This concept is significant in consumer behaviour as it influences consumption patterns; consumers will allocate their budget to maximise total utility, leading to a point where they are indifferent to buying additional units of a good if the marginal utility falls below its price.
5. How does income and substitution effect relate to changes in demand?
Ans. The income effect refers to the change in quantity demanded of a good due to a change in the consumer's real income, which can occur when the price of the good changes. The substitution effect occurs when a change in price leads consumers to substitute one good for another. Together, these effects explain how and why the quantity demanded of a product changes in response to price fluctuations, influencing overall consumer behaviour in the market.
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