NUMERICAL QUESTIONS:

1. The following table gives four difference schedules of an individual.

combinations IC1 IC2 IC3

Qx Qy Qx Qy Qx Qy
A 3 12 6 12 8 15
B 4 7 7 9 9 12
C 6 4 9 6 11 9
D 9 2 12 4 15 6
E 14 1 15 3 19 5

a. Using graph, plot the three indifference curves on the same set of axes.
b. Calculate the marginal rate of substitution of X for Y between various points of IC1.

2.Complete the following schedule and explain marginal rate of substitution with the help of diagram.

Combination Commodity X Commodity Y MRS

A 1
B 2
C 3
D 4
E 5

3. Ruman has a limited income which he spends on goods X and Y, market price of X and Y are Rs.5 per
unit and Rs. 10 per unit respectively. When he draws his budget line, it terminates X-axis at 20 units.
Find Ruman’s income and slope of his budget line.
4. Suppose at point P on her IC for X and Y, Drishti has 15 units of X and 25 units of Y. when she moves
down to Q on IC her combination of two goods changes to 17 units of X and 24 units of Y. what is
MRS between points P and Q.
5. Suppose a consumer has money income of Rs.140 to purchase two goods X and Y and price of X and Y
are Rs.7 and Rs.14 respectively. Sketch consumer’s budget line, if money income increases to Rs.210
while price of two goods remains constant. Draw new budget line.
6. Suppose money income of consumer is Rs.300 and the price of two goods X and Y are Rs.15 and Rs.10
respectivley. Sketch budget line, if the price of X increases from Rs.15 to Rs.30 what will be the
position of price line.
7. Suppose a consumer has fixed income equals to Rs.5000 to spend on X and Y. the price of X and Y are
Rs.50 and Rs.100 respectively.
a. Sketch budget line. Assume that consumer splits his income equally between X and Y how much
qty. of X and Y will he purchase?
b. Let consumer’s budget increases from 5000 to 10000. Sketch the new budget line and show the
point of new equilibrium.
c. Derive income demand curve and identify the nature of good.
 8. Suppose price of X is Rs.4 and price of Y is Rs.10 and budget constraint is RS.60
a. Sketch budget line
b. Assume that income is equally spends on X and Y. show where consumer end up on budget ine.
c. Suppose income falls from RS.60 to RS.40 sketch new budget constraint.
d. After fall in income consumer spends income equally on both goods X and Y then show new
equilibrium condition.
e. Derive Engel curve of X
9. Income of the consumer is Rs.400 and price of A and B is Rs.20 and Rs.40 respectively.
a. Draw budget line.
b. Suppose consumer spends Rs.120 on A and RS.280 on B. find consumer’s equilibrium condition.
c. Suppose price of A falls to Rs.10. draw new budget line.
d. After change in price consumer spends equally on both goods. Find new equilibrium.
e. Derive PCC curve. What is nature of X and Y.
10. Complete following table and draw IC curve.

Combination X Y MRS
A 2 16 -
B 3 12
C 4
D 5
E 6