Posted by Anjali Kaur on Sep 12, 2021

What is consumer behavior?

In this post, you will find some questions on the introduction to microeconomics and consumer theory. We will learn what is consumer behavior?

At the end of this post, you can download the PDF file.

1. How does the budget line change if a consumer’s income increases from Rs 20 to Rs 40 but the price remain unchanged?

Solution: If the income of the consumer increases, then the budget line shifts to the right or increases.

How the Budget Line Changes - Microeconomics - Hayden Economics

2. What is the slope of the demand curve?

Solution: Change in Price / Change in quantity demanded

3. Draw indifference map. 

Solution: A collection of more than one indifference curve is known as the indifference map.

Indifference Curves

4. Which of the of following can be referred to as ‘point satiety?

  1. Marginal Utility is negative 
  2. Marginal utility is zero
  3. Total Utility is rising 
  4. Total Utility is falling

Solution: When the consumer reaches its maximum satisfaction level, that point is known as the point of satiety. So, when TU is maximum, then MU is 0. Hence, option 2.

5. What happens to MU when TU is maximum and constant?

  1. MU becomes zero
  2. MU becomes negative 
  3. MU declines 
  4. MU remains same

Solution: MU becomes zero.

6. Hitesh buys pizza and coke. The marginal utility of last piece of pizza is 80 utils and of last sip of coke is 40 utils. The price of pizza is { 40 and that of coke is ? 20. This means that Hitesh is buying 

  1. more pizza and less coke. 
  2. more coke and less pizza.
  3. both at optimal level.
  4. same quantity of both.

Solution: Both at an optimal level.

7. Draw Indifference curve.

Solution: The indifference curve is a curve that shows the combination of commodities that provide the same level of satisfaction to the consumer.

8. Draw TU and MU curve.

Solution:

Explain the relation between tu and mu - Find 4 Answers & Solutions |  LearnPick Resources

9. Draw a budget line and write its equation with slope. 

Solution. XP1 + YP2 = M

Slope of the budget line = -p1/p2

10. A consumer consumes only two goods X and Y. Her money income is Rs 24 and the prices of a goods X and Y are Rs 4 and Rs 2 respectively. Answer the following questions: 

  1. Can the consumer afford a bundle 4X and 5Y? Explain.
  2. What will be the MRS when the consumer is in equilibrium? Explain.

Solution:

  1. Let’s try,

Px is 4 and Py is 2.

4 X 4 + 2 X 5 = 26

Since the bundle is more than the income. He cannot afford this bundle.

2. In equilibrium

MRS = P1/P2

MRS = 4/2 = 2

11. Suppose there are three consumers in a particular market: Ashok, Aakash and Mayank. Their demand schedules are given in the following table:

Price Quantity Demanded by AshokQuantity Demanded by AakashQuantity Demanded by Mayank
1605524
2504013
340255
430100
52000

 (a) Derive the market demand schedule.

(b) Suppose Aakash drops out of the market. Derive the new market demand schedule.

(c) Suppose Aakash stays in the market and another person, Dakshdeep, joins the market, whose quantity demanded at any given price is half of that of Ashok. Derive the new market demand schedule.

Solution:

(a)

Price Quantity Demanded by AshokQuantity Demanded by AakashQuantity Demanded by MayankMarket Demand schedule
1605524= 60 + 55 + 24 = 139
2504013= 103
340255= 70
430100= 40
52000= 20
Price Quantity Demanded by AshokQuantity Demanded by MayankNew market demand
16024= 84
25013= 63
3405= 45
4300= 30
5200= 20
Price Quantity Demanded by AshokQuantity Demanded by AakashQuantity Demanded by MayankQuantity demanded by DakshdeepNew market demand schedule
160552430169
250401325128
3402552090
4301001555
520001030

You can read more related posts:

  1. Introduction to Economics
  2. What do you mean by an economy?
  3. What are the Central problems of the economy?
  4. Production Possibility Curve
  5. What causes PPC to shift?
  6. What does the opportunity cost mean?
  7. The point on and off the Production Possibility Curve

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