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Economics - CBSE CLASS XII

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Unit - 2

Q .21. Draw a demand curve which has unitary elastic demand
Ans : OR    

Q . 22. When is demand for a commodity said to be elastic?
Ans When the price of a good falls   or rises and total expenditure rises or falls respectively, the demand for that good is elastic. The price and expenditure are inversely related. Ed = ∞

Q .23. When is demand for a commodity said to be inelastic?
Ans : When the price and expenditure are directly related. Ed = 1 . Change in price does not change the quantity demanded.

   SA (3/ 4 marks)

Q . 24 . Explain the relationship between total utility and marginal utility with the help of a diagram.

Ans: Relation between TU and MU

Qty.

TU

MU

0

0

-

1

8

8

2

14

6

3

18

4

4

20

2

5

20

0

6

18

-2

Q . 25.Explain the law of diminishing marginal utility with the help of an example
Ans : Law of DMU states that MU tends to decline as consumption of the commodity increases.

Consumption
Of  X

TU

MU

1

100

100-0=100

2

190

190-100=90

3

270

270-190=80

4

340

340-270=70

5

400

400-340=60

Q . 26.Define consumer equilibrium. State the condition in case of a single commodity.
Ans : Consumer’s equilibrium means allocation of income, by a consumer on goods and services he buys, which give him max. satisfaction.
The conditions in case of single commodity are:-
1. MU = price (consumer will keep on buying till MU>price
2. Total gain falls as more is purchased after equilibrium ( consumer continues to purchase as long as gain is increasing or constant)

Q. 27 Explain the condition of consumer equilibrium in case of 2 goods
Ans: In case of two goods conditions are:-
1. MU of last unit of money spent on each good is same (Law of equi-marginal utility)

2. MU of a good falls as more of it is consumed.

Q. 28. Complete the following table.

Amount consumed

1

2

3

4

5

TU

50

90

A

140

150

MU

50

b

30

c

d

Ans: a =  90 + 30 = 120, b = 90- 50 = 40, c = 140 – a (120) = 20, d= 150 – 140 = 10

Q.29 Why 2 indifference curves intersect each other?
Ans : The 2 IC's intersect each other to show the point of equilibrium

Q. 30. 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.31.What do you mean by monotonic preferences?
Ans : Monotonic preferences mean that as consumption increases total utility also increases along with

Q. 32.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. 33. 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 .34 .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 . 35 .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. 36 . 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 . 37 .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 . 38 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 . 39 . 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. 40 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.

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Prepared By: Mrs. kritika bhola
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