Q What do you mean by consumer equilibrium?
A Consumer equilibrium is a situation in which a person gets maximum satisfaction.
Q What do you mean by utility?
A Want satisfying power of any commodity is known as consumer equilibrium.
Q What is Total Utility?
A It is the sum total of utility derived from the consumption of all units of a commodity.
Q What is Marginal Utility?
A it refers to additional utility on account of the consumption of an unit of a commodity.
Q What is Budget line?
A It refers to attainable combinations of sets of two commodity at given prices of commodity and income of the consumer.
Q Explain the following :-
a) Indifference set
b) Indifference Curve
c) Indifference Map
A a) Indifference set is a set of two commodities which offers the consumer same level of satisfaction, so that he is indifferent between these combinations.
b) Indifference Curve is the diagrammatic presentation of an indifference set. it shows the set of two commodities that offers the consumer the same level of satisfaction, so that he is indifferent between these combinations.
c) Indifference Map refers to a set of indifference curve.
Q Explain relation between MU and TU. [Very Important] 3/4 marks
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Q What is Budget line?
A It refers to attainable combinations of sets of two commodity at given prices of commodity and income of the consumer.
Q Explain the following :-
a) Indifference set
b) Indifference Curve
c) Indifference Map
A a) Indifference set is a set of two commodities which offers the consumer same level of satisfaction, so that he is indifferent between these combinations.
b) Indifference Curve is the diagrammatic presentation of an indifference set. it shows the set of two commodities that offers the consumer the same level of satisfaction, so that he is indifferent between these combinations.
c) Indifference Map refers to a set of indifference curve.
Q Explain relation between MU and TU. [Very Important] 3/4 marks
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Q Explain Consumer Equilibrium in case of single commodity or one commodity. 6 Marks, [V.I]
A Meaning of Consumer Equilibrium :- It is a situation in which a costumer is getting maximum satisfaction and he has no tendency to change his pattern of consumption.
Condition:- MUX = PX
Assumptions :-
a) Utility can be measured in terms of units.
b) Consumer is rational and wants maximum satisfaction.
c) Independent utility
d) MU of money is constant. MU of money is known as worth of a rupee.
e) Law of Diminishing Marginal Utility is applied here
Schedule:- Suppose a consumer is buying orange and the price of each unit of orange is rupee 4, hypothetical MU of orange is given as
Explanation of schedule :- It is evident from the schedule that consumer will purchase four oranges and reaches an equilibrium position.
In this situation the position of the consumer equilibrium MUX (in rupee) is equal to PX is satisfied.
Diagram:-
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Q What changes does it make to the quation of consumer equilibrium when he decides to spend his income on two commodity rather than one?
OR
Explain consumer euilibrium in case of double commodity. Very important, 6 marks
Meaning of Consumer equilibrium:- It is a situation in which a consumer is satisfied and he has no tendency to change his pattern of consumption.
Condition:- MUx = MUY = MUM
A Meaning of Consumer Equilibrium :- It is a situation in which a costumer is getting maximum satisfaction and he has no tendency to change his pattern of consumption.
Condition:- MUX = PX
Assumptions :-
a) Utility can be measured in terms of units.
b) Consumer is rational and wants maximum satisfaction.
c) Independent utility
d) MU of money is constant. MU of money is known as worth of a rupee.
e) Law of Diminishing Marginal Utility is applied here
Schedule:- Suppose a consumer is buying orange and the price of each unit of orange is rupee 4, hypothetical MU of orange is given as
Units | MUX | PUX |
1 | 8 | 4 |
2 | 6 | 4 |
3 | 4 | 4 |
4 | 2 | 4 |
Explanation of schedule :- It is evident from the schedule that consumer will purchase four oranges and reaches an equilibrium position.
In this situation the position of the consumer equilibrium MUX (in rupee) is equal to PX is satisfied.
Diagram:-
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Q What changes does it make to the quation of consumer equilibrium when he decides to spend his income on two commodity rather than one?
OR
Explain consumer euilibrium in case of double commodity. Very important, 6 marks
Meaning of Consumer equilibrium:- It is a situation in which a consumer is satisfied and he has no tendency to change his pattern of consumption.
Condition:- MUx = MUY = MUM
PX PY
Assumption:-
a) Consumer is rational
b) Utility can be measured in term of money
c) MUM is constant
e) Only standard unit of commodity are consumed by consumer
f) Law of Diminishing Marginal Utility applied here
Diagram Explanation :-
PP1 represents MU x commodity whereas QQ1 represents MU of Y commodity. It shows equality at A and A1. it is a ideal situation for the consumer where consumer will be in equilibrium
Now if he spends one less unit of X and one more unit of Y then he will not be in position of equilibrium then he will be at point B and B1 which is not a situation of equilibrium because he gets one less unit of commodity X and one more unit of commodity Y.
Q Explain consumer equilibrium with the help of IC (indifference curev) analysis. Very Important( 6 marks)
A Meaning of consumer equilibrium :- it a situation in which a consumer is getting maximum level of satisfaction from a commodity and has no tendency to bring change in pattern of consumption.
Condition :- Px = MRS
Py
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Budget Line:- It refers to the attainable combinations of a set of two goods at given prices of goods and income of the consumer.
Explanation of Diagram :- Q shows the equilibrium position where a consumer is getting maximum satisfaction from both the commodity, now if he moves to point T then he will get more satisfaction from good2 and less from Good 1 which is not a situation f equilibrium so he will remain at point Q where he is getting same level of satisfaction from both the commodities.
Q Explain consumer equilibrium with the help of IC (indifference curev) analysis. Very Important( 6 marks)
A Meaning of consumer equilibrium :- it a situation in which a consumer is getting maximum level of satisfaction from a commodity and has no tendency to bring change in pattern of consumption.
Condition :- Px = MRS
Py
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Explanation of Diagram :- Q shows the equilibrium position where a consumer is getting maximum satisfaction from both the commodity, now if he moves to point T then he will get more satisfaction from good2 and less from Good 1 which is not a situation f equilibrium so he will remain at point Q where he is getting same level of satisfaction from both the commodities.
