08th April, 2020 || IHS Dubai || Asynchronous Learning

12:10 PM - 01:00 PM

Write answers to below questions in your notebooks during the timings of

asynchronous period.

(1 mark each)
1. Define indifference curve.
2. Define budget line.
3. Define monotonic preference.
4. Define consumer equilibrium.
5. What is indifference map?

(3 marks each)
6. Explain the indifference curve with schedule and diagram.
7. Explain the reaction of the consumer if the situation is MUx /Px > MUy /Py.
8. A consumer’s budget is Rs. 40. He is buying Good 1 and Good 2. Price of Good
1 is Rs. 8/unit; and price of Good 2 is Rs. 10/unit. Draw a budget line on the
basis of this information.
9. How does the budget line change if the consumer’s income increases, but the
prices remain constant. Use diagram to explain.
(4 marks)
10. A consumer wants to consume two goods. The prices of the goods are Rs. 4 and
Rs. 5 respectively. The consumer’s income is Rs. 20.
a. Write down the equation of the budget line.
b. How much of Good 1 can the consumer consume if she spends her entire
income on that good?
c. How much of Good 2 can the consumer consume if she spends her entire
income on that good?
d. What is the slope of the budget line?
11. Answer below questions.
a. Distinguish between attainable and non-attainable combinations of a set of
two goods. Draw a suitable diagram.
b. A consumer can afford to buy 6 units of Good 1 and 8 units of Good 2, if
he spends his entire income. The prices of the two goods are Rs. 6 and
Rs. 8 respectively. How much is the consumer’s income?