Answer1.

Introduction
It is a graphical representation of the mixture of products where the satisfaction will
remain same this can be referred as indifference curve. (IC) It’s nothing but two
different goods combine with one another and satisfaction remains same. For
example As shown in the below table and diagram when combination of food
consumption that’s apple and banana when apple is 1 banana is 15 at the moment a
apple is 2 banana is 10 as we see apple increases its consumption automatically
banana decreases its consumption.
Combination Apple Banana
A 1 15
B 2 10
C 3 6
D 4 3
E 5 1

INDIFFERENCE CURVE
16

14

12
BANANA

10

0
0 1 2 3 4 5 6
APPLE

Concept and Application

Properties of Indifference Curve
1.Indifference curves slop downwards: Indifference curve slopes downwards from
left to right that its negative slope. The slope is downward because it operates under
the law of MRTS (Mass Rapid Transport System). After we increase apple as
consumption we’ve got to decrease banana consumption to produce a same level of
output. Thus, the Indifference curve are often downward sloping from left to right
There can’t be an upward sloping IC because it shows that a given product may be
produce by using less of both the food consumption. Similarly an IC cannot
be horizontal or vertical because it also doesn’t represent the equilibrium position of
a corporation.

2.Every Indifference curve to the right represents a higher level of satisfaction: If

there’s a multiple Indifference curve showing different level of consumption in one
diagram where higher the IC that’s the IC is far from the origin indicates higher level
of output and therefore indifference curve near the origin indicates lower level of
output this implies that the indifference curve at a higher level from the axis shows
greater satisfaction than an indifference curve at a lower level.

3.Indifference Curve cannot intersect each other: The Indifference curve never
intersect each other as higher and lower curves show different levels of satisfaction.

4.Indifference Curve will not touch the axis: An indifference curve cannot only touch
x-axis or y-axis. This can be born out of our assumption that the consumer is
considering different combinations of two commodities.

5.Indifference Curve are convex to the right: The vital property or feature of the
indifference curves is that they’re convex to the origin and that they can’t be
concave to the origin. A standard IC are going to be convex to the origin and it
cannot be concave only convex will lend to the principles of diminishing marginal rate
of substitution. In the case of concave curve it will lead to increasing marginal rate of
substitution which is impossible.

Conclusion
From above all assumptions we can conclude when there are two commodities
increase in one automatically decrease in another. Additionally indifference curve is
as some what replacement of the marginal utility analysis of a commodity’s demand.

Answer 2.
Introduction
Elasticity of Demand: The concept of elasticity was first introduced by Dr. Alfred
Marshall. The elasticity of demand helps us to understand the level of change in
demand with respect to a change in any of the determinants of demand. Demand
may be elastic or inelastic. We may thus define elasticity of demand as the ratio of
the percentage change in quantity demanded to the percentage change in price.
There are also three types of elasticity of demand Price elasticity of demand ,Income
elasticity of demand, Cross elasticity of demand.
Concept and Application
Price Elasticity of Demand: Price Elasticity of demand shows the degree of
responsiveness of quantity demanded of a good to the change in its price. It is
assumed that the consumer income, tastes, and prices of all other goods are steady.
There are types of price elasticity of demand.
1.Perfectly elastic demand (ed=∞): When percentage change in quantity demand
increases or decreases but it does not impact on price. Price remains constant it is
known as perfectly elastic demand.
2.Perfectly inelastic demand (ed=0): When percentage change in price increases or
decreases but it does not impact on quantity demanded. Quantity demand remains
constant.
3.Relatively elastic demand (ed> 1): When percentage change in price is less than
percentage change in quantity demand it is called as relatively elastic demand.
4.Relatively inelastic demand (ed< 1): When percentage change in price is greater
than percentage change in quantity demand it is called as relatively inelastic
demand.
5.Unitary elastic demand (ed=1): When quantity demand change it is equal to
change in its price.
Formula
𝐏𝐞𝐫𝐜𝐞𝐧𝐭𝐚𝐠𝐞 𝐜𝐡𝐚𝐧𝐠𝐞 𝐢𝐧 𝐪𝐮𝐚𝐧𝐭𝐢𝐭𝐲 𝐝𝐞𝐦𝐚𝐧𝐝𝐞𝐝
Price elasticity of demand= 𝐏𝐞𝐫𝐜𝐞𝐧𝐭𝐚𝐠𝐞 𝐜𝐡𝐚𝐧𝐠𝐞 𝐢𝐧 𝐩𝐫𝐢𝐜𝐞

∆𝑸 𝑷
𝒆𝒑 = ×
∆𝑷 𝑸
∆𝑃=Change in price
∆Q=Change in quantity demanded
P=Initial price
Q=Initial quantity demanded
P=4 ∆𝑃= -1(4-5=-1)
∆𝑸 𝑷
Q=25 ∆Q= 5(25-20) 𝑒𝑝 = ×
∆𝑷 𝑸
𝟓 𝟒
= ×
−𝟏 𝟐𝟓
−𝟒
=
𝟓
=-0.8
Conclusion
Price elastic of demand is -0.8 or 0.8 which is less than one which means it is a
inelastic demand. From above steps and formulas we can find out price elasticity of
demand for products.

Answer 3a.
Introduction
The elasticity of demand helps to find out various types like cross elasticity of
demand, income elasticity of demand, price elasticity of demand. In short all these
tells us about the comparison of price and demand. It shows when price for
commodity increases then demand also increases or decreases and vice versa.

Concept and Application

Cross elasticity of demand: Sometimes we find two goods are inter related to each
other either they are substitute or complementary goods further we will study about
this. Cross elasticity of demand is defined as the percentage change in quantity
demanded of a commodity with respect to the change in the price of its related
commodity. It can be measured as
Percentage change in quantity demanded of X
ec =
Percentage change in price of Y

There are classification of cross elasticity of demand are as follows

Substitute: When price increases then quantity demand also increases like if tea
price increases demand for coffee also increases it is an positive measure.
Complementary: When price increase then quantity demand decreases for example
when ink price increase there is an decrease in demand of pen it is an negative
measure.
Unrelated: when price increases it does not affect on quantity demand for example
when table price increase there is no change in demand of car it is an zero measure.
As per given in question solution as follow
Percentage change in quantity demanded of X
ec =
Percentage change in price of Y

Percentage change in quantity demanded of X

1.2=
5%

Percentage change in quantity demanded is 6%

Conclusion
From cross elasticity of demand we can conclude percentage change in quantity
demanded and percentage change in price we can say that the goods remain
substitute items. The products either be positive negative or unrelated.
Answer3b.
Introduction
Utility is the want satisfying power/capacity of the commodity. It is as needs and
wants of human beings for example If Nikita is thirsty she want water to drink. Water
is an commodity and that water has that much capacity which will satisfy Nikita
thirsty ness. Utility have many features Utility is psychological, Utility has no ethical
or moral significance etc.
Concept and Application
Utility such as total utility and marginal utility.
Total Utility(TU): Total utility it is the sum of utility derived from the consumption of all
the units of a commodity. It is measured as TU=𝑈1 +𝑈2 +𝑈3 …….
Marginal Utility(MU):Marginal utility refers to the additional utility derived by a
consumer from an additional unit of a commodity consumed. In other words it is the
addition made by the last unit of a commodity consumed. It can be measured as
𝑇𝑈𝑛 -𝑇𝑈𝑛−1
Average Utility(AU): Average utility gained by the consumer from one unit commodity
consumed it can be measured as Total Utility/Quantity Consumed.

Quantity Total Utility Marginal Utility Average Utility

Consumed
1 20 20 20
2 35 15 17.5
3 47 12 15.66
4 55 8 13.75
5 60 5 12

Marginal Utility=𝑇𝑈𝑛 -𝑇𝑈𝑛−1

=20-0=20 for quantity consumed 1
=35-20=15 for quantity consumed 2….

Average Utility=Total Utility/Quantity Consumed

=20/1=20 for quantity consumed 1
=35/2=17.5 for quantity consumed 2….
Conclusion
We can conclude that utility is nothing but the human being needs or want of
commodity. Utility is not measure able because it depends on different consumer.