Q10 of 30 Page 1

Identify which of the following is not true for the Indifference Curves. Give valid reasons

for the choice of your answer:


a. Lower indifference curve represents a lower level of satisfaction.


b. Two regular convex to origin indifference curves can intersect each other.


c. Indifference curve must be convex to the origin at the point of tangency with the budget


line at the consumer’s equilibrium.


d. Indifference curves are drawn under the ordinal approach to consumer equilibrium.


OR


A consumer has total money income of 250 to be spent on two goods X and Y with prices


of 25 and 10 per unit respectively. On the basis of the information given, answer the


following questions:


a. Give the equation of the budget line for the consumer.


b. What is the value of the slope of the budget line?


c. How many units can the consumer buy if he is to spend all his money income on good X?


d. How does the budget line change if there is a fall in the price of good Y?

Two regular convex to origin indifference curves can intersect each other. This statement is not true because indifference curves can never intersect.

An indifference curve is a graph showing a combination of two goods that give the consumer equal satisfaction and utility. Each point on an indifference curve indicates that a consumer is indifferent between the two and all points give him the same utility.


OR


It is a straight line in the commodity space since it is a linear equation in x and y.


Equation is M̅ = px.x + py.y


b.


Its slope is negative and is equal to − px/py. , the numerical slope of the budget line is px / which is equal to the ratio of the prices of X and Y.


c.


25Qx+10Qy=250


If he doesn’t buy Y then Qy=0


Now, 25Qx+0=250


Qx=10 units


d.


If the price of Y falls, the consumer will buy more quantity of Y with the same amount of money. This would push Y-intercept of the Budget line away from the origin.


More from this chapter

All 30 →
8

“In a hypothetical market of mobile phones, the brand AWAAZ was leading the market

share. Its nearest competitor VAARTA suddenly changed its strategy by bringing in a new


model of the mobile phone at a relatively lesser price. In response, AWAAZ too slashed its


price.”


Based on the above information, identify the form of the market represented and discuss any one


a feature of the market.


Or


Discuss the primary reason for ‘indeterminateness of demand curve’ under the oligopoly form of market.

 9

a. Arrange the following coefficients of price elasticity of demand in ascending order:

-0.7, -0.3, -1.1, -0.8


b. Comment upon the degree of elasticity of demand for Good X, using the total outlay


method, if the price of X falls from 18 per unit to 13 per unit and its quantity demanded


rises from 50 units to 100 units. (1+3)

 11

Explain the concept of marginal opportunity cost using a numerical example

 12

Define Price Floor. What is the common purpose of fixation of floor price by the

government? Explain any one likely consequence of this nature of intervention by the


government.


OR


Define Price Ceiling. What is the common purpose for the price ceiling imposed by the


government? Explain any one likely consequence of this nature of intervention by the


government in the price determination process. (2+2+2)