CBSE Class 12 Economics Theory of Consumer Behaviour VBQs

Question. Keeping the health of the people in mind, the government should be considerate in fixing the .price of essential items like milk, as price elasticity of demand is;
Answer.
a) More than one
b) less than one,
c) equal to one
d) zero

Question. For proper allocation of his income, a consumer shall maximize his gain when the
Answer.
a) MU=Price
b) MU>Price
c) MU<Price
d) None

Question. Price of petrol has increased. As a result, the consumer should:
Answer. Decrease its demand,
b) Economize on it by no wastage
c) Increase its demand
d) none

Question. How can the government meet the amount demanded of an essential good like onions in the face of shortage?
Answer.
a) Rise the price
b) Fall in price
c) Rationing d)None

Question. Taste and preference for cola have increased manifold their consumption among children. Being unhealthy, it should be urgently checked through
Answer.
a) Rise in price
b ) Rationing
c) Parent‘s help
d) school as a counselor

Question. Before the purchases, a given consumer in order to behave rationally should look at
Answer.
a) Price of the product
b) Its marginal utility
c) After-sale service
d) All the three.

Question. Demand for water is :
Answer.
a) More elastic
b) Inelastic
c) Perfectly elastic
d) perfectly inelastic

Question. On account of subsidy given to an essential item, consumers have started spending more on this item. Based on the principle of ‗equal distribution, . What can be done to restrict its consumption?
Answer.
a) increase in its price
b) ration it
c) increase its supply
d) none of the above

Question. What is the shape of the demand curve when the elasticity of demand is perfectly elastic?
Answer.
a) horizontal to the x axis
b) vertical to the x axis
c) slope downwards
d) none.

Question. Price of petrol is very high but still its demand continues to be very high. Suggest two measures by way of which demand of petrol can be decreased.
Answer. Demand for petrol is high despite of its price, being high because of derived demand.. As the cars are in demand, petrol is in demand.
Two measures of conserving these scarce resources are: a) car pool instead of each member with a car Use alternate methods of transportation which are cheaper and cleaner like Metro, whenever possible

Question. Demand for electricity is increasing but due to scarcity of resources. Its supply cannot be increase. Suggest two measures as how you can curtail the demand for electricity?
Answer. Demand for electricity can be curtailed by
a) Switching off its usage when not in use, eg TV to be switched off when not in use.
b) Consumers of electricity should conserve it, for example, by using 1 AC instead of 3 AC for three family members separately.

Question. As a consumer would you equate price of a commodity with total utility or marginal utility? Give reason in support of your answer.
Answer.A consumer would equate price of the commodity with its marginal utility and not total utility.
Reason: The consumer, while buying a unit of a commodity, compares additional benefit and additional cost related to the unit. Additional benefit is marginal utility, while additional cost is p of the commodity. He will buy a particular unit only when MU is at least equal to P. And he strikes his equilibrium when MU =P The consumer does not compare P with TU because TU is the sum total of utility resulting from all the units of a commodity he is buying . It cannot be compared with P which is always related to one unit.

Question. How does it matter to a consumer in case of MRSxy>Px/Py?
Answer. MRSxy, refers to ratio between change in y commodity to a change x commodity or the amount of goody that the consumer is willing to give up for one more unit of good X according to his taste and preferences, Px/Py, on the other hand , the amount of good Y that the consumer has to give up for one more unit of good X, according to the market price of X and Y. In case MRSxy > Px/PY, it implies a situation that what the consumer is willing to give up exceeds what he is required to give up.. Will the consumer be rational in such a situation, if he stops buying more of x in place of Y? Certainly not.so, he better moves downward on IC. Increase in his purchase of x in place of Y, will reduce his MRS to align with the required rate of substitution between x and y.

Very Short Answer Type Questions

Question. What cause an upward movement along a demand curve?
Answer. Increase in price while other factors are constant.

Question. If the number of consumers increase, in which direction will the demand curve shift?
Answer. Rightward.

Question. A straight line demand curve is given. What will be elasticity of demand on the mid point of this curve.
Answer. Equal to unit.

Question. If the slope of a demand curve is parallel to X-axis, what will be the elasticity of demand?
Answer. Perfectly elastic.

Question. Why is demand of water inelastic?
Answer. Because water is a necessity good.

Question. Define price elasticity of demand.
Answer. The price elasticity of demand is the degree of responsiveness of quantity demanded of a commodity to the change in its price.

Question. Why does total utility increases at diminishing rate due to continuous increase in consumption?
Answer. As more and more units of commodity are consumed, marginal utility derived from each successive unit tends to diminish so total utility increases at diminishing rate up.

Question. Due to decrease in price of pen why does the demand of ink increase?
Answer. These are complementary goods.

Short Answer Type Questions

Question.Explain how the demand for a good is affected by the price of its related goods.
Give examples.
Answer. Related goods are either substitutes or complementary Substitutes Goods : When price of a substitute falls, it becomes cheaper than the given good. So the consumer substitutes it for given good will decrease. Similarly, a rise in the price of substitute will result in increase in the demand for given good.
For example Tea and Coffee.
Complementary Goods : When the price of a complementary good falls its demand rises and the demand for the given good will increase. Similarly when price of complementary good increases, then demand for given good decreases.
For example : – Car & Petrol.

Question.Distinguish between normal goods and inferior goods. Give example also.
Answer. 
Normal Goods : These are the goods the demand for which increases as income of the buyer rises. There is a positive relationship between income and demand or income effect is positive.
Example ; Rice, Wheat
Inferior Goods : These are the goods the demand for which decreases as income of buyer rises. Thus, there is negative relationship between income and demand or income effect is negative.
Example : coarse grain, coarse cloth.