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Chapters
1: Microeconomics and Macroeconomics: Introduction
2: Demand and Law of Demand
▶ 3: Theory of Consumer Behaviour: Marginal Utility and Indifference Curve Analysis
4: Elasticity of Demand
5: Supply - Law of Supply and Price Elasticity of Supply
6: Market Mechanism: Equilibrium Price and Quantity in a Competitive Market
7: Laws of Returns - Returns to a Factor and Returns to Scale
8: Cost and Revenue Analysis
9: Forms of Market
10: Producer's Equilibrium
11: Determination of Equilibrium Price and Output Under Perfect Competition
SECTION 2: THEORY OF INCOME AND EMPLOYMENT
12: Theory of Income and Employment
SECTION 3: MONEY AND BANKING
13: Money: Meaning and Functions
14: Banks: Commercial Bank and Central Bank
SECTION 4: BALANCE OF PAYMENTS AND EXCHANGE RATE
15: Balance of Payments and Exchange Rate
SECTION 5: PUBLIC FINANCE
16: Fiscal Policy
17: Government Budget
SECTION 6: NATIONAL INCOME
18: National Income and Circular Flow of Income
19: National Income Aggregates
20: Methods of Measuring National Income
SECTION 7: PROJECT WORK
21: Project Work
22: Model Short Answer Questions
![Frank solutions for Economics [English] Class 12 ISC chapter 3 - Theory of Consumer Behaviour: Marginal Utility and Indifference Curve Analysis - Shaalaa.com](/images/economics-english-class-12-isc_6:872f47036b5c4267ae061d4279703803.jpg "Frank solutions for Economics [English] Class 12 ISC chapter 3 - Theory of Consumer Behaviour: Marginal Utility and Indifference Curve Analysis")
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Solutions for Chapter 3: Theory of Consumer Behaviour: Marginal Utility and Indifference Curve Analysis
Below listed, you can find solutions for Chapter 3 of CISCE Frank for Economics [English] Class 12 ISC.
Frank solutions for Economics [English] Class 12 ISC 3 Theory of Consumer Behaviour: Marginal Utility and Indifference Curve Analysis TEST YOURSELF QUESTIONS [Pages 50 - 55]
Select the correct option for each of the following questions: (1 mark each)
The aggregate utility obtained from the consumption of a specific unit of a commodity is called ______.
Marginal utility
Total utility
Maximum utility
Additional utility
Which of the following formula is correct?
MUnth = TUn + TUn + 1
MUnth = TUn - TUn - 1
MUnth = TUn - TUn + 1
TUn = MU1 + MU2 + ... MUnth
When TU is maximum then MU is ______.
zero
neagative
decreasing
increasing
When marginal utility becomes negative then TU ______.
increases
remain same
decreases
negative
Point of saturation refers to a situation when ______.
TU is rising
TU is falling
MU is negative
MU is zero
When TU is increasing at a decreasing rate MU will be ______.
decreasing
constant
negative
increasing
When total utility falls then MU is ________.
zero
negative
positive
increases
Which of the following statement is correct?
When MU is negative, TU will be increasing
When MU is positive, TU will be decreasing
When MU is zero, TU is maximum
None of these
______ states that as more and more units of a commodity are consumed, the marginal utility derived from the additional units must decline.
Law of Equi-Marginal Utility
Law of Demand
Law of Supply
Law of Diminishing Marginal Utility
______ states that as the consumer will distribute his money income between the goods in such a way that the utility derived from the last rupee spent on each good is equal.
Law of Equi-Marginal Utility
Law of Diminishing Marginal Utility
Both Law of Equi-Marginal Utility and Law of Diminishing Marginal Utility.
Neither Law of Equi-Marginal Utility nor Law of Diminishing Marginal Utility.
If a consumer consumes only one commodity 'X' he will be in equilibrium when ______.
MUx > Px
MUx = Px
MUx < Px
None of these
According to law of equimarginal utility, consumer will be in equilibrium while purchasing X and Y commodities when:
MUₓ = Pₓ
$$\frac{\mathrm{MU}_{\mathrm{x}}}{\mathrm{P}_{\mathrm{x}}} = \frac{\mathrm{P}_{\mathrm{y}}}{\mathrm{MU}_{\mathrm{y}}}$$
$$\frac{\mathrm{MU}_{\mathrm{x}}}{\mathrm{P}_{\mathrm{x}}} = \frac{\mathrm{MU}_{\mathrm{y}}}{\mathrm{P}_{\mathrm{y}}}$$
None of these
Locus of all the points representing bundles of two goods among which the consumer is indifferent is called ______.
budget line
consumer equilibrium
indifference map
indifference curve
The slope of the indifference curve is equal to ______.
one
marginal utility
marginal rate of substitution
none of these
Which of these is not true about the shape of the indifference curve?
concave to the origin
convex to the origin
negatively sloping
straight line
Which of the following statements is incorrect?
Indifference curves are convex to the origin.
Indifference curves slope downward to the right.
A higher indifference curve represents a higher level of satisfaction.
Indifference curves intersect each other.
Indifference curves are convex to the origin because of ______.
Increasing MRS
Decreasing MRS
Constant MRS
Diminishing MU
If marginal rate of substitution increases throughout the indifference curve, the slope of the indifference curve will be ______.
straight line
concave to the origin
convex to the origin
horizontal
Indifference curves never intersect each other due to ______.
different level of satisfaction
same level of satisfaction
convex to the origin
concave to the origin
If the prices of both the goods X and Y remain unchanged, the increase in the income of the consumer will shift the budget (price) line to ______.
right
left
remain unchanged
budget line will become steeper
A decrease in the price of X-axis product will make the budget line ______.
flatter
steeper
parallel
none of these
The slope of the budget line in case of commodity X and Y is affected by ______.
price of commodity X-alone
price of commodity Y-alone
taste and preference of the consumer
prices of both the commodities
For a stable consumer's equilibrium of MRSxy must be ______.
constant
diminishing
increasing
none of the these
Match the correct pairs from the Column 1 and Column 2. Column 1:
| Column 1 | Column 2 |
| (1) Indifference curve | (a) `(MU_x)/(P_x) = (MU_y)/(P_y)` |
| (2) Marginal utility curve | (b) Indifference curve convex to the origin |
| (3) Law of equi-marginal utility | (c) Negatively sloped |
| (4) Diminishing marginal rate of substitution | (d) Downward sloping |
From the following statements given in Column I and Column II, choose the correct pair of statements.
| Column I | Column II |
| A. Marginal utility | 1. The power of the commodity to satisfy human wants. |
| B. Cardinal measure of utility | 2. The addition to total utility resulting from the consumption of one additional unit of a commodity. |
| C. Total utility | 3. It is the sum total of utility derived from the consumption of all units of a commodity. |
| D. Utility | 4. It is the measurement of utility which is measured in terms of units. |
A - 2, B - 1, C - 3, D - 4
A - 1, B - 2, C - 3, D - 4
A - 2, B - 4, C - 3, D - 1
A - 1, B - 2, C - 4, D - 3
Given below are two statements marked as Assertion (A) and Reason (R). Read the statements carefully and choose the correct option.
Assertion (A): A higher indifference curve is preferred to a lower indifference curve.
Reason (R): The higher indifference curve gives higher level of satisfaction.
Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation for Assertion (A).
Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation for Assertion (A).
Assertion (A) is true and Reason (R) is false.
Both Assertion (A) and Reason (R) are false.
Assertion (A): Consumer’s equilibrium is attained when budget line is tangent to a particular indifference curve.
Reason (R): This is the highest indifference curve which gives him the maximum utility.
Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation for Assertion (A).
Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation for Assertion (A).
Assertion (A) is true and Reason (R) is false.
Both Assertion (A) and Reason (R) are false.
Very short Answer Questions (2 marks each)
Define Utility.
When can utility be negative?
Define marginal utility.
Define the following concept:
Total utility
How is marginal utility derived from total utility?
How is total utility derived from marginal utility?
What is the shape of marginal utility curve?
When total utility is maximum, how much is the marginal utility?
When does marginal utility become negative?
Explain the law of diminishing marginal utility.
State and explain the assumptions of the law of diminishing marginal utility.
Explain the condition of consumer's equilibrium with the help of utility analysis.
Explain the Law of Equi-Marginal Utility.
What is the difference between cardinal and ordinal measurement of utility?
What is an indifference curve?
What is an indifference map?
Explain an indifference map with the help of a diagram.
What is scale of preference?
State two assumptions of indifference curve analysis.
Discuss any two properties of the indifference curve.
Explain the marginal rate of substitution between two goods.
Explain why an indifference curve is downward sloping from left to right.
Explain why the indifference curve is convex to the origin.
Why two indifference curves cannot intersect each other?
What is a budget line?
Explain why the budget line is downward sloping.
What determines the slope of the budget line?
What is meant by consumer's equilibrium?
Explain the condition of consumer's equilibrium with the help of utility analysis.
State the condition of consumer's equilibrium in terms of the indifference curve approach.
State two differences between utility analysis and indifference curve analysis.
What does a point inside the budget line indicate?
Short Answer Questions (3 marks each)
Explain the relationship between Total utility and Marginal utility.
State the assumptions of marginal utility analysis.
The following table shows the marginal utility derived from the purchase of books. The price of the book is ₹ 500. Draw a diagram to explain consumer's equilibrium where MU = P.
| Number of books | MU |
| 1 | 700 |
| 2 | 600 |
| 3 | 500 |
| 4 | 400 |
| 5 | 300 |
Explain any two properties (characteristics) of the indifference curve with the help of a diagram.
What is diminishing marginal rate of substitution?
How does diminishing marginal rate of substitution affect the shape of indifference curve?
Explain the properties of budget-line.
State two assumptions of indifference curve analysis.
Draw an indifference curve.
Explain an indifference curve convexity to the point of origin.
Long Answer Questions (6 marks each)
Explain the law of diminishing marginal utility.
A marginal utility schedule of a person is given below. Discuss the law underlying the given schedule.
| Pens (units) | 1 | 2 | 3 | 4 | 5 |
| MU (utils) | 25 | 20 | 15 | 10 | 5 |
Explain why consumer's equilibrium is attained when the marginal utility of a product is equal to its price.
OR
Explain consumer's equilibrium in case of a single commodity in terms cardinal utility theory.
Using the utility approach, discuss how a consumer attains equilibrium?
Explain the law of equi-marginal utility with the help of a numerical example.
A consumer consumes goods X and Y. Given below is his marginal utility schedule for goods X and Y. Suppose the price of X is ₹ 2 of Y is ₹ 1 and income is ₹ 12. State the law of equimarginal Utility and explain how the consumer will attain equilibrium.
| Units | 1 | 2 | 3 | 4 | 5 | 6 |
| MUX | 16 | 14 | 12 | 10 | 8 | 6 |
| MUY | 11 | 10 | 9 | 8 | 7 | 6 |
Robert consumes commodities X and Y. The price of commodity X is ₹ 2 and the price of commodity Y is ₹ 1. He has decided to spend ₹ 11 on these two commodities.
- Using the following schedule, identify the combination of the two commodities X and Y that gives maximum satisfaction to Robert. [4]
Units 1 2 3 4 5 6 MUX 16 14 12 10 8 6 MUY 10 9 8 7 6 5 - State the underlying law related to the schedule given above. Mention the equilibrium condition. [2]
Explain the equilibrium of a consumer in case of two commodities with the help of utility approach.
What is an indifference curve?
Explain any two properties (characteristics) of the indifference curve with the help of a diagram.
Explain consumer’s equilibrium using indifference curve analysis.
Why does the consumer choose a point where the indifference curve is tangent to the budget line?
Study the schedule given below and identify how much of the commodity A and commodity B will a utility maximising consumer buy.
| Units | MU of A | units of B | MU of B |
| 1 | 10 | 1 | 30 |
| 2 | 8 | 2 | 24 |
| 3 | 6 | 3 | 20 |
| 4 | 4 | 4 | 16 |
| 5 | 2 | 5 | 14 |
| 6 | 1 | 6 | 8 |
Note: Price of A = ₹ 2 Price of B = ₹ 4 Income = ₹ 20
Thinking Beyond
Economists have been discussing for long the diamond-water paradox, i.e., why is the market value (price) of diamond more than the value of water even though the total utility of water is much more than the utility of diamond. How would you explain the diamond-water paradox?
Explain the following:
What will be the shape of an indifference curve when Marginal rate of substitution between two goods is constant?
Explain the following:
What will be the shape of an indifference curve when Two goods are perfect substitutes?
Explain the following:
What will be the shape of an indifference curve when Two goods are complementary?
What happens to budget line if both the prices of the good and income of the consumer double.
How does the budget line change when the price of the commodity shown on X-axis falls while income remain unchanged?
Solutions for 3: Theory of Consumer Behaviour: Marginal Utility and Indifference Curve Analysis
Frank solutions for Economics [English] Class 12 ISC chapter 3 - Theory of Consumer Behaviour: Marginal Utility and Indifference Curve Analysis
Shaalaa.com has the CISCE Mathematics Economics [English] Class 12 ISC CISCE solutions in a manner that help students grasp basic concepts better and faster. The detailed, step-by-step solutions will help you understand the concepts better and clarify any confusion. Frank solutions for Mathematics Economics [English] Class 12 ISC CISCE 3 (Theory of Consumer Behaviour: Marginal Utility and Indifference Curve Analysis) include all questions with answers and detailed explanations. This will clear students' doubts about questions and improve their application skills while preparing for board exams.
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Concepts covered in Economics [English] Class 12 ISC chapter 3 Theory of Consumer Behaviour: Marginal Utility and Indifference Curve Analysis are Microeconomics, Macroeconomics Vs Microeconomics, Macroeconomics, Meaning of Demand, Features of Demand, Types of Demand, Determinants of Demand, Demand Function, Quantity Demanded and Demand, Introduction to Microeconomics and Macroeconomics, Introduction to Demand, Law of Demand, Demand Schedule, Demand Curve, Linear Demand Curve, Reasons for the Downward Slope of the Demand Curve, Importance of the Law of Demand, Exceptions to the Law of Demand, Movement Along the Demand Curve, Change in Demand – Shift in Demand Curve, Difference Between Extension and Increase in Demand, Individual Demand Curve to Market Demand Curve, Difference Between Contraction and Decrease in Demand, Cross Price Effects, Relationship Between Income and Demand, Impact of Tastes and Preferences on Demand for a Commodity, Industry Demand Vs Firm Demand, Slope of the Demand Curve, Concept of Utility, Cardinal Utility Analysis / Marginal Utility Analysis, Types of Marginal Utility, Total Utility and Marginal Utility, Forms of Utility, Features of Utility, Relationship Between Total Utility and Marginal Utility, Law of Diminishing Marginal Utility, Consumer's Equilibrium through Cardinal Utility Approach, Exceptions of the Law of Diminishing Marginal Utility, Importance of the Law of Diminishing Marginal Utility, Law of Equi-Marginal Utility, Exceptions of the Law of Equi-marginal Utility, Importance of the Law of Equi-marginal Utility, Consumer's Equilibrium through Indifference Curve Approach, Indifference Curve, Indifference Map, Marginal Rate of Substitution (MRS), Assumptions of Indifference Curve Analysis, Properties of Indifference Curves, Price Line or Budget Line, Consumer's Equilibrium through Indifference Curve Approach, Comparison of Utility Theory and Indifference Curve Theory, Ordinal Utility Analysis/Indifference Curve Analysis, Indifference Schedule, Relationship Between Marginal Rate of Substitution and Marginal Utility.
Using Frank Economics [English] Class 12 ISC solutions Theory of Consumer Behaviour: Marginal Utility and Indifference Curve Analysis exercise by students is an easy way to prepare for the exams, as they involve solutions arranged chapter-wise and also page-wise. The questions involved in Frank Solutions are essential questions that can be asked in the final exam. Maximum CISCE Economics [English] Class 12 ISC students prefer Frank Textbook Solutions to score more in exams.
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