Theory of Consumer's Demand (IEcoS (Economic Services) Economics Paper-1): Questions 1 - 6 of 21

Access detailed explanations (illustrated with images and videos) to 85 questions. Access all new questions we will add tracking exam-pattern and syllabus changes. Subscription can be renewed yearly absolutely FREE! View Sample Explanation or View Features.

Rs. 300.00 or

How to register?

Question number: 1

» Theory of Consumer's Demand » Indifference Curve Analysis and Utility Function

Edit

Appeared in Year: 2011

Essay Question▾

Describe in Detail

What do you mean by a corner solution? In the case of perfect complementary goods, where do you get the corner solution?

Explanation

The corner solution occurs when the consumers’ preferences are such that the utility is maximized just by consuming only one of the two goods. It is inevitable in the case of concave ICs and occurs in the case of Convex ICs when the Budget Line is either steeper or less steep than the ICs.

Graph shows the corner solution

Graph Shows the Corner Solution

Corner solution in the case of concave indifference curves

… (81 more words) …

Question number: 2

» Theory of Consumer's Demand » Price Income and Substitution Effects

Edit

Appeared in Year: 2011

Essay Question▾

Describe in Detail

Define the compensated Demand Curve. How does it differ from the uncompensated Demand curve?

Explanation

  • Compensated Demand Curve is a demand curve that shows the change in demand of a good when the price changes but the real income or purchasing power is held constant.
  • While the compensated demand curve demonstrates only the substitution effect, the uncompensated demand curve describes both the substitution and income effects of the changes in pr

… (21 more words) …

Question number: 3

» Theory of Consumer's Demand » Indifference Curve Analysis and Utility Function

Edit
Essay Question▾

Describe in Detail

Discuss cross elasticity of demand. Based on such definition, how can you distinguish between substitute and complementary goods?

Explanation

Definition:

The measure of responsiveness of the demand for a good towards the change in the price of a related good is called cross price elasticity of demand. It is always measured in percentage terms.

Cross Elasticity of demand describes the change in demand of one good in response to the change in the price of another good. It is given by th

… (135 more words) …

Question number: 4

» Theory of Consumer's Demand » Indifference Curve Analysis and Utility Function

Edit

Appeared in Year: 2011

Essay Question▾

Describe in Detail

Consider the utility function where and are the quantities of two commodities on which the consumer spends his monthly income Rs. 5,000. If the price per unit of and be 50 and 20 respectively, find out the optimal quantities of and ?

Explanation

Utility function is given as follows:

MU of is

MU of is

… (156 more words) …

Question number: 5

» Theory of Consumer's Demand » Price Income and Substitution Effects

Edit

Appeared in Year: 2011

Essay Question▾

Describe in Detail

Define income effect, substitution effect and price effect of any change in price. Show that the price effect can be decomposed into the income effect· and the substitution effect.

Explanation

  • Substitution effect means the change in the demand of a good due to a change in the rate of exchange between two goods (relative prices) holding the purchasing power constant. On the other hand, Income effect is the change in the demand due to a change in the real income while the relative prices are held constant.

  • Price effect is the sum of

… (284 more words) …

Question number: 6

» Theory of Consumer's Demand » Marginal Utility and Demand

Edit

Appeared in Year: 2013

Essay Question▾

Describe in Detail

If the law of demand is P, where p is price and x is quantity demanded. Express price elasticity of demand, total revenue and marginal revenue as functions of x.

Explanation

Taking log of each side, we get:

Total revenue

… (96 more words) …

Developed by: