Unit 2 -CONSUMER S EQUILIBRIUM and DEMAND

Unit 2 -CONSUMER S EQUILIBRIUM and DEMAND

ASSIGNMENT – 2

Class : XII

MICRO ECONOMICS

Unit – 2 -CONSUMER’S EQUILIBRIUM AND DEMAND

  1. Explain the rationale behind the conditions of consumer’s equilibrium under Hicksian Analysis.
  1. A consumer buys 18 units of a good at a price of 9 per unit. The price elasticity of demand for the good is (- ) 1. How many units the consumer will buy at a price of 10 per unit? Calculate.
  1. A consumer consumes only two goods A and B and is in equilibrium. Show that when price of goods B falls, demand for B rises. Answer this question with the help of utility analysis.
  1. Explain the change in demand for a good on account of change in price of related goods.
  1. Distinguish between decrease in demand and decrease in quantity demanded.
  1. A consumer consumes only two goods X and Y whose prices are 4 and 5 per unit respectively. If the consumer chooses a combination of the two goods with marginal utility of X equal to 5 and that of Y equal to 4, is the consumer in equilibrium? What will a rational consumer do in the situation? Use utility analysis.
  1. Why is there an inverse relationship between price of a good and its quantity demanded? Explain.
  1. A consumer spends 1,000 on a good priced at 8 per unit. When price rises by 25 per cent , the consumer continues to spend 1,000 on the good. Calculate price elasticity of demand by percentage method.
  1. The price elasticity of demand of commodity Y is half the price elasticity of commodity X. A 15 per cent rise in price of X results in a 45 per cent fall in its demand. If the price of Y rises by 6 per cent, calculate the percentage fall in its demand.
  1. 10 percent fall in the price of a good raises its demand from 150 units to 180 units. Calculate its price elasticity of demand.
  1. The quantity demanded of a good is 1500 units at the price of 10 per unit. Its price elasticity of demand is (–) 1.5. Calculate its quantity demanded, when its price falls to 8 per unit.
  1. A consumer spends 60 on a good priced at 5 per unit. When price falls by 20 per cent, the consumer continues to spend 60 on the good. Calculate price elasticity of demand by percentage method.
  1. A consumer consumes only two goods X and Y both priced at Rs. 3 per

Unit. If the consumer choose a combination of these two goods with

Marginal Rate of Substitution equal to 3, is the consumer in

equilibrium? Give reasons. What will a rational consumer do in this

situation? Explain.

  1. A consumer consumes only two goods X and Y, both priced at 2 per unit. If the consumer chooses a combination of the two goods with Marginal Rate of Substitution equal to 2, is the consumer in equilibrium ? Why or why not ? What will a rational consumer do in this situation ? Explain.
  1. What will be the effect of 10 per cent rise in price of a good on its demand if price elasticity of demand is (a) zero, (b) – 1 and (c) -2?
  1. Price elasticity of demand for the two goods X and Y are zero and (-) 1 respectively. Which of the two is more elastic and why?
  1. Explain the degrees of demand using numerical examples.

To be submitted on 10 – 4 – 17

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