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Economics - CBSE CLASS XII

Unit - 2

Q . 1.Define Total utility.
Ans : Total Utility is the sum total of utility derived from the consumption of all the units of a commodity.

Q . 2. Define Marginal Utility.
Ans : Marginal utility refers to additional utility on account of the consumption of an additional unit of a commodity.

Q . 3. How can total utility be derived from marginal utility?
Ans : TU = ∑MU

Q . 4 . State the law of equi -marginal utility.
Ans: The law of equi-marginal utility states that the ratio of marginal utility to price is same in case of all goods when the consumer is in equilibrium

Q . 5. What happens to TU when MU is positive?
Ans : TU goes on increasing

Q . 6. What happens to TU when MU is zero?
Ans : A- TU is maximum

Q. 7 What happens to TU when MU is negative?
Ans: TU starts diminishing.

Q. 8.Give the meaning of indifference curve.
Ans: An IC is the locus of different combinations of the two goods, the consumer consumes with each of the combination having the same utility.

Q.9 Why 2 indifference curves intersect each other?
Ans : The 2 IC's intersect each other to show the point of equilibrium

Q. 10. Define marginal rate of substitution.
Ans : MRS is the rate at which the consumer is willing to sacrifice one good to obtain one more unit of the other good.

Q.11.What do you mean by monotonic preferences?
Ans : Monotonic preferences mean that as consumption increases total utility also increases along with

Q. 12.What is law of demand ?
Ans :The law of demand states that there is an inverse relation between a change in the price of a good and the consequent change in the demand for that good, assuming no change in all other factors influencing the demand.

Q. 13. Differentiate between demand schedule and demand curve.
Ans : A demand schedule shows different quantities of a good consumer is willing to buy at different prices and a demand curve is the graphical representation of a demand schedule.

Q .14 .When a commodity is called inferior good?
Ans : A good whose demand by a consumer falls with the rise in income of that consumer is called an inferior good.

Q . 15 .What are normal goods? Give 2 examples.
Ans: Normal goods are those goods whose demand by a consumer rises with the rise in the income of that consumer. Eg. Milk, Fruits.

Q. 16 . Give one point of difference between substitute goods and complementary goods.
Ans : Two goods are substitutes if one can be used in place of the other.
Two goods are complementary t each other when they are used jointly.

Q . 17 .Distinguish between change in demand and change in quantity demanded.
Ans :Change in demand means when the tastes and preferences of the consumer changes and change in qty. demanded means there is change in the amount of good which he is purchasing ,i.e it either increases or decreases.

Q . 18 Mention one factor each which causes upward and downward movement along the demand curve
Ans :Upward and downward movement along the demand curve is due to rise and fall in price of the commodity.

Q . 19 . Mention one factor each which causes leftward and rightward shift in demand curve.
Ans :Leftward and rightward shift in demand curve is due to decrease and increase in demand at its existing price.

Q. 20 Define price elasticity of demand.
Ans : Price elasticity of demand is a measurement of percentage change in demand due to percentage change in own price of the commodity.

Prepared By: Mrs. kritika bhola
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