CBSE Class 12 Economics Theory of Consumer Behaviour Worksheet

Read and download free pdf of CBSE Class 12 Economics Theory of Consumer Behaviour Worksheet. Students and teachers of Class 12 Economics can get free printable Worksheets for Class 12 Economics Part A Microeconomics Chapter 2 Theory of Consumer Behaviour in PDF format prepared as per the latest syllabus and examination pattern in your schools. Class 12 students should practice questions and answers given here for Economics in Class 12 which will help them to improve your knowledge of all important chapters and its topics. Students should also download free pdf of Class 12 Economics Worksheets prepared by school teachers as per the latest NCERT, CBSE, KVS books and syllabus issued this academic year and solve important problems with solutions on daily basis to get more score in school exams and tests

Worksheet for Class 12 Economics Part A Microeconomics Chapter 2 Theory of Consumer Behaviour

Class 12 Economics students should refer to the following printable worksheet in Pdf for Part A Microeconomics Chapter 2 Theory of Consumer Behaviour in Class 12. This test paper with questions and answers for Class 12 will be very useful for exams and help you to score good marks

Class 12 Economics Worksheet for Part A Microeconomics Chapter 2 Theory of Consumer Behaviour

Very Short Answer Type Questions
 
Question. Define Indifference curve Map.
Answer. A family of indifference curve indicating different levels of satisfaction called indifference map.

Question. How is budget line defined?
Answer. Budget line is a line showing all different possible combinations of two goods which a consumer can buy with his given income and the price of both goods.

Question. Why does higher indifference curve give more satisfaction?
Answer. Higher difference curve shows a higher level of satisfactions. It shows the various combinations of excess quantity of both goods than lower indifference curve.

Question. What is the impact of diminishing marginal rate of substitution on the slope of indifference curve?
Answer. Indifference curve become convex towards the origin.
 
Question. Define monotonic preference.
Answer. Consumer’s preferences are called monotonic when between any two bundles, one bundle has more of one good and no less of other good.

Question. How is market demand schedule derived with the help of individual demand schedules?
Answer. By summations of individual schedules.

Question. Define normal good.
Answer. Normal goods are those goods, the demand for which increases as income of the buyer rise. There in positive relation between income and demand of these goods.
 


Short Answer Type Questions


Question. ‘‘Average product can never be zero while marginal product can be’’. Comment.
Answer: MP can become zero when production does not increase with increase in the number of variable factor. On the other hand, AP can never be zero as it is calculated on the basis of TP and variable units of input. Both TP and variable units cannot be zero which makes it impossible for AP to be zero. Hence, it is clear that MP can be zero,but AP will never be zero.

Question. Explain the concept of a production function.
Answer: It is the technological knowledge that determines the maximum levels of output that can be produced using different combinations of inputs.
If the technology improves, the maximum levels of output obtainable for different input combinations increase. Then we have a new production function.
e.g., A firm produce a product (Y) by using two inputs X1 and X2. Then production function can be expressed as qy = f (X1 . X2 )

Question. State giving reasons, whether the following statements are true or false.
(i) When there are diminishing returns to a factor, total product first increases and then starts falling?
(ii) When marginal product falls, average product will also fall?
Answer: (i) False, this is because of decline in marginal product.
Falling marginal product implies that total product continues to increase at a diminishing rate.
(ii) False, Average product can rise even when marginal product falls.

Question. Explain the concepts of the short-run and the long-run.
Answer: Short-run Short-run refers to a period in which output can be changed by changing only variable factors.
In the short- run, fixed inputs like land, building, plant machinery etc, cannot be changed. It means, production can be raised by increasing only variable factors, but till the extent of fixed factors.
Long- run Long-run refers to a period in which output can be changed by changing all factors of production. In the long run, firm can change its factory size, techniques of production, purchase new plant machinery, patents etc.

Question. ‘‘Fixed cost of input is ignored in the study of the law of increasing return’’. Do you agree?
Answer: No, it is not correct. In fact, fixed cost plays an important role in deriving increasing returns from variable inputs.
A firm can leverage its fixed cost to derive better returns due to improved productivity of resources.
e.g. rent is paid every month for the factory space which is fixed cost.
By employing more labours, the production can be maximised and returns of paying rent as fixed cost can be increased. Hence, fixed cost is not ignored in the analysis of law of increasing returns to variable factor.

Question. What is meant by returns to a factor? State the law of diminishing returns to a factor.
Answer: Returns to a Factor It refers to the behaviour of output when only one variable factor of production is increased in short-run and fixed factors remain constant.
Law of Diminishing Returns to a Factor It refers to a situation in which total output increases at a diminishing rate when more and more variable factor is combined with the fixed factor of production. In this situation,Marginal Product of the variable factor must be diminishing.

Question. A producer borrows money and opens a shop. The shop premises is owned by him. Identify implicit cost and explicit cost from this information. Also,explain.
Answer: In the above example, interest paid on borrowed money will be explicit cost, whereas, the imputed rent of the shop premises is implicit cost.
Explicit Cost These are those cash payments, which firms make to outsiders for their services and goods. e.g. wages,payment for raw material, rent, interest, etc. Implicit Cost These are the costs of self-owned and self-employed resources. e.g. entrepreneur may utilise his own building for factory use, interest on self-capital, etc.

Question. Define variable costs. Explain the behaviour of total variable cost as output increases.
Answer: Variable costs are those costs, which vary directly with the quantity of output produced.
Total variable cost increases with increase in output.
Initially, it increases at decreasing rate. Eventually, it increases at an increasing rate.

Question. Explain the relationship between AP and MP.
Answer: Relationship between AP and MP is stated below 
(i) AP increases when MP is greater than AP.
(ii) AP is maximum when both MP and AP are equal.
(iii) AP decreases when MP is less than AP.
(iv) AP continues to be positive even when MP is zero or negative.
(v) AP may rise even when MP falls but lies above AP.

Question. ‘‘Average revenue curve represents law of demand’’. Discuss.
Answer: Average revenue is determined by dividing total revenue by the quantity sold which indicates price of the commodity. Hence, average revenue curve shows the relationship between price of a commodity and quantity demanded.
It is downward sloping curve because to increase its sales, firms have to lower their prices. So, it possesses all the characteristics of the demand curve. Therefore, we can say that Average Revenue curve represents law of demand.

Question. Why AC curve is ‘U’ shaped?
Answer: The main reason for this ‘U’ shaped AC curve is the operation of the law of variable proportion. We know as output increases,
law of increasing return operates in the initial stages. At this stage, when a firm increases its output, it gets economies and the
result is decline in average cost. After the point of optimum combination, economies turn into diseconomies and result in
increase in output and average cost. This is the stage of law of diminishing returns.

Question. Explain the relationship between Marginal Cost and Average Cost using diagram.
Answer: Relationship between Marginal Cost (MC) and Average Cost (AC) is stated below
(i) When AC falls, MC is lower than AC.
(ii) When AC rises, MC is greater than AC.
(iii) When AC is constant and minimum, MC is equal to AC.

Question. Why the total revenue curve of a competitive firm faces a straight line passing through origin?
Answer: A competitive firm sells its output at the uniform price.
The price or AR is constant and MR is also constant which is equal to AR.
The Total Revenue is the sum total of MR corresponding to different levels of output. Since, MR is constant, TR increases at a constant rate. Thus, TR curve is a straight line. It passes through the origin because when sale is zero, TR is also zero.  

Question. State giving reasons, whether the following statements are true or false
(i) When Total Revenue is constant, Average Revenue will also be constant.
(ii) When Marginal Revenue falls to zero, Average Revenue becomes maximum.
(iii) Marginal Revenue is always the price at which the last unit of the commodity is sold.
(iv) WhenMarginal Revenue is positive and constant, Average Revenue and Total Revenuewill both increase at constant rate.
Answer: (i) False, when Total Revenue is constant, Average Revenue will be diminishing.
(ii) False, when Marginal Revenue is zero, Average Revenue will be diminishing.
(iii) False, Marginal Revenue can never be the price at which the last unit of the commodity is sold. It simply refers to
additional revenue, when an additional unit of output is sold.
(iv) False, because when Marginal Revenue is positive and constant, Total Revenue increases at constant rate but Average
Revenue tends to be equal to Marginal Revenue.
 

Long Answers Type Questions
 
Question. Discuss the causes of increasing returns to a factor.
Answer: Increasing returns to a factor occur because of the following factors
(i) Fuller Utilisation of the Fixed Factor In the initial stages, fixed factor remains underutilised. Its fuller utilisation is possible by adding additional units of
the variable factor to total output and the Marginal Product of the variable factor tends to increase.
(ii) Increased Efficiency of the Variable Factor Additional application of the variable factor causes process based division of labour that raises efficiency
of the factor. Accordingly, marginal productivity of the factor tends to rise.
(iii) Better Coordination between the Factors So long as fixed factor remains underutilised, additional application of the variable factor tends to improve.
As a result, total output increases at an increasing rate.

Question. State giving reasons, whether the following statements are true or false
(i) Average Variable Cost falls even when Marginal Cost is rising.
(ii) The difference between Total Cost and Total Variable Cost falls with increase in output.
(iii) As soon as Marginal Cost starts rising, Average Variable Cost also starts rising.
(iv) Average Cost falls only when Marginal Cost falls.
(v) The difference between Average Total Cost and Average Variable Cost is constant.
(vi) As output is increased, the difference between Average Total Cost and Average Variable Cost falls and ultimately becomes zero.
Answer: (i) True, Average Variable Cost can fall even when Marginal Cost is rising as minimum point of MC lies to the left of AVC.
(ii) False, because the difference between Total Cost and Total Variable Cost is equal to Total Fixed Cost which remains constant at all levels of output.
(iii) False, Average Variable Cost can fall even when Marginal Cost is rising.
(iv) False, Average Cost can fall even when Marginal Cost is rising.
(v) False, the difference between AVC and ATC is AFC which can never be constant. Since, AFC tends to decline with increase in output, the difference
between ATC and AVC must reduce as output increases.
(vi) False, because as output increases, the difference between ATC and AVC falls but can never be zero.
The difference is equal to AFC, which must remain positive, even when it is falling.

Question. Discuss the causes of diminishing returns to a factor.
Answer: Diminishing returns to a factor or the law of diminishing returns may be explained in terms of the following factors 
(i) Fixity of the Factor It is the principal cause behind the law of diminishing returns.
As more and more units of the variable factor is combined with the fixed factor, the latter gets excessively utilised, leading to decrease in its
productivity.
(ii) Imperfect Factor Substitutability Factors of production are imperfect substitutes of each other.
e.g. more and more of labour cannot be continuously used in place of additional capital.
Accordingly, diminishing returns to the variable factor become inevitable.
(iii) Poor Coordination between the Factors Continuous increasing application of the variable factor alongwith fixed factors beyond a point, crosses the limit of ideal factor ratio.
This results in poor coordination between the fixed and variable factors.

 

Question. Area under MC curve is ...... .
(a) total cost
(b) total fixed cost
(c) total variable cost
(d) None of these 

Answer: C

Question. As output increases, average fixed cost curve ...... .
(a) remains constant
(b) starts falling
(c) starts rising
(d) None of these 

Answer: B

Question. Statement I MC becomes zero when AC is at its minimum point.
Statement II AC, AVC and MC curves always start from the same point.
Alternatives
(a) Statement I is correct and Statement II is incorrect
(b) Statement II is correct and Statement I is incorrect
(c) Both the statements are correct
(d) Both the statements are incorrect 

Answer: B

Question.When the firm is producing 3 tonnes of sugar, it receives total revenue of ` 24. Raising production to 4 tonnes, increases total revenue to ` 28. Thus, marginal revenue is ...... .
(a) ` 4
(b) ` 8
(c) ` 28
(d) ` 52 

Answer: A

Question. Statement I Total revenue is the product of price per unit of output and units sold.
Statement II Average revenue is the slope of marginal revenue.
Alternatives
(a) Statement I is correct and Statement II is incorrect
(b) Statement II is correct and Statement I is incorrect
(c) Both the statements are correct
(d) Both the statements are incorrect 

Answer: A

Question. What is ‘production’ in economics?
(a) Creation/Addition to the value of output
(b) Production of foodgrains
(c) Creation of services
(d) Manufacturing of goods  

Answer: A

Question. Function showing relationship between input and output is known as ...... .
(a) Consumption function
(b) Investment function
(c) Production function
(d) Cost function 

Answer: C

Question. Average Product (AP) is at its maximum when
(a) MP > AP
(b) MP < AP
(c) MP = AP
(d) MP becomes negative 

Answer: C

Question. When total product falls, then ...... .
(a) average product is equal to zero
(b) marginal product is equal to zero
(c) marginal product is negative
(d) average product continues to rise 

Answer: C

Question. In which time period, all factors of production become variable and factors of production change with the change in level of production?
(a) Long period
(b) Market period
(c) Short period
(d) All of these 

Answer: A 

Question. Increasing returns is applicable because of ...... .
(a) increased efficiency of variable factor
(b) fuller utilisation of fixed factor
(c) indivisibility of factors
(d) Both (a) and (b) 

Answer: D 

Question. In the first stage of law of variable proportions,total product increases at an ...... .
(a) decreasing rate
(b) increasing rate
(c) constant rate
(d) Both (a) and (b) 

Answer: B

Question. Which of the following curve is not ‘U’ shaped?
(a) AFC
(b) AVC
(c) MC
(d) AC 

Answer: A

Question. When average cost curve is rising, then marginal cost curve ...... .
(a) must be decreasing
(b) must be constant
(c) must be rising
(d) Any of these 

Answer: A

Question. Law of variable proportion is valid when ....... .
(a) atleast one input is fixed and all other inputs are kept variable
(b) all factors are kept constant
(c) all inputs are varied in the same proportion
(d) None of the above 

Answer: A

Question. Payment made to outsiders for their goods and services are called ...... .
(a) Opportunity cost
(b) Real cost
(c) Explicit cost
(d) Implicit cost 

Answer: C

Assertion-Reasoning MCQs

(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
(b) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A)
(c) Assertion (A) is true, but Reason (R) is false
(d) Assertion (A) is false, but Reason (R) is true

Question. Assertion (A ) According to law of diminishing returns to factor, marginal physical product of labour decrease but remains positive.
Reason (R) In the second stage of returns to factor, there is over utilisation of fixed factors. 

Answer: A

Question. Assertion (A) Average product increases only when marginal product increases.
Reason (R) Rate of change of marginal product is greater than rate of change in average product.

Answer: D

Question. Assertion (A) During increasing returns to factor,total variable cost increases at a diminishing rate.
Reason (R) In the first phase of law of variable proportions, variable factors are highly efficient.

Answer: (A)

Question. Assertion (A) Total variable cost curve is inversely ‘S’ shaped owing to law of variable proportions.
Reason (R) In the initial stage of production,both fixed and variable factors are underutilised.

Answer: A

Question. Assertion (A) A rational producer prefer producing in the second stage of law of variable proportion.
Reason (R) In the stage of diminishing returns, AP and MP both falls but AP lies above MP. 

Answer: B

 
Case Study Questions  Producer’s Behaviour Class 12 Economics


Direction Read the following text and answer question no. (i) to (vi) on the basis of the same.
Farmers in our country are mostly small and marginal. They produce for self-consumption and hardly have any surplus crop to sell in market.
These farmers produce with the help of their family members. Also due to limited land holding at times, there are more labour working compared with what is actually required, this leads to disguised unemployment.
Use of primitive tools and techniques further reduces the ability of these families to increase production.

Question. In case of disguised unemployment, marginal product of labour is equal to
(a) zero
(b) positive
(c) negative
(d) Either (a) or (c) 

Answer: A

Question. In case of land, the ‘law of returns to factor’ is applicable in ……… .
(a) short-run
(b)medium-run
(c) long-run
(d)None of these  

Answer: A

Question. In the above situation, productivity was low due to ………… .
(a) fixity of land
(b) use of primitive tools and techniques
(c) excessive use of variable factor
(d) All of the above 

Answer: D

Question. A rational producer should opt to produce in ………… stage.
(a) increasing-returns to scale
(b) diminishing-returns to scale
(c) constant returns to scale
(d) None of the above

Answer: B

Question. Which of the following is a variable factor of production in farming?
(a) Farming land
(b) Labour
(c) Equipments
(d) Both (b) and (c) 

Answer: D

Question. Assertion (A) In case of disguised employment, total physical product becomes constant.
Reason (R) When more people work at a place then required, additional workers does not contribute much to the output.
Alternatives
(a) Both Assertion (A) and Reason (R) are true and Reason
(R) is the correct explanation of Assertion (A)
(b) Both Assertion (A) and Reason (R) are true, but
Reason (R) is not the correct explanation of Assertion (A) (c) Assertion (A) is true, but Reason (R) is false (d) Assertion (A) is false, but Reason (R) is true

Answer: A

Direction Read the following text and answer question no. (i) to (vi) on the basis of the same.
Revenue is an important aspect of producer’s behaviour. In indicates a firm’s receipts from sales.
In other words, it also indicates the demand for firm’s goods and services. More sales usually indicates more revenue but higher sale depends upon the form of market and clasticity of demand.
Firms have better control over price when demand is inelastic.

Question. Incremental revenue is always equal to price under .......... market.
(a) perfect competition
(b) monopoly
(c) monopolistic
(d)None of these 

Answer: A

Question. In which form of market, average revenue is inelastic?
(a) Perfect competition
(b) Monopoly
(c) Monopolistic
(d)None of these 

Answer: B

Question. When average revenue is elastic, marginal revenue is
(a) inelastic
(b) also elastic
(c) perfectly elastic
(d) perfectly inelastic 

Answer: B

Question. Average revenue under monopolistic competition is elastic due to
(a) lower price
(b) greater choice
(c) price control
(d) All of these 

Answer: B

Question. ……… curve represent the demand curve of a firm as mentioned in the given paragraph.
(a) Total revenue
(b) Average revenue
(c) Marginal revenue
(d) None of the above 

Answer: B

Question. Assertion (A) Total revenue and profits are equal under the market with constant price.
Reason (R) When price becomes constant,additional revenue becomes equal to average revenue.
Alternatives
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
(b) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A)
(c) Assertion (A) is true, but Reason (R) is false
(d) Assertion (A) is false, but Reason (R) is true  

Answer: D

Part A Microeconomics Chapter 02 Theory of Consumer Behaviour
CBSE Class 12 Economics Theory of Consumer Behaviour Worksheet
Part A Microeconomics Chapter 03 Production and Costs
CBSE Class 12 Economics Production and Costs Worksheet
Part B Macroeconomics Chapter 02 National Income Accounting
CBSE Class 12 Economics National Income Accounting Worksheet
Part B Macroeconomics Chapter 03 Money and Banking
CBSE Class 12 Economics Money And Banking Worksheet
Part B Macroeconomics Chapter 05 Government Budget and The Economy
CBSE Class 12 Economics Government Budget And The Economy Worksheet
Part B Macroeconomics Chapter 06 Open Economy Macroeconomics
CBSE Class 12 Economics Balance Of Payment Worksheet

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