Class 12 Microeconomics Sandeep Garg Solutions Chapter 2 – Consumer’s Equilibrium
FAQs on Microeconomics Class 12: Sandeep Garg Chapter 2 Solutions
1. Is the demand for the following elastic, moderate elastic or inelastic? Give reasons.
1. Fuel demand - Fuel demand is moderately expanded as if the cost of fuel increases, consumers will reduce their consumption.
2. Demand for textbooks - Demand for textbooks does not change because even if the price goes up the demand will never change.
3. Demand for cars - The demand for cars is expanding as it is a luxury so as the price of a car goes up, its demand goes down.
4. Demand for milk - The demand for milk increases because when the price of milk goes up the consumer starts taking less milk.
2. Describe four determinants of demand for a commodity.
The four determinants for the demand for commodity are listed below:
1. Price of the commodity- When the cost of goods increases your demands decrease keeping all other factors of demand constant and vice versa.
2. Consumer income - As customer revenue increases, demand for standard goods increases and vice versa.
3. Price of related goods - In a related product, demand increases with the decrease in the price of related goods. With regard to replacement, demand for goods decreases with the depreciation of other replacement assets.
4. Taste and preferences of the customer - With the change in people's taste and taste the need goes up and the need for taste decreases.
3. Describe the assumption which is made to determine the consumer’s equilibrium position.
The assumptions made to determine the consumer equilibrium position are set out below.
1. Rationality - The buyer has a reasonable attitude, they want to spend more on the given amount and the amount
2. Utility in Ordinal - It is thought that the consumer measures his performance according to the satisfaction from each product combination.
3. Consistency of Choice - It is also considered that the customer's choice is consistent.
4. Competitive Competition - Competitive competition in the market is the type where a large number of sellers sell the same products.
5. Total Utility - This depends on the total amount of product used by the consumer.
4. What is a Budget Line? Explain why the budget line is declining.
The budget line is a diagram showing all the combinations of two goods that a consumer can buy with income and commodity prices. It is also called the easy-to-use line. The budget list goes down because if a buyer wants to buy more than one item, he has to buy a small amount of other goods, given the income. The budget line shows all the different combinations of the two commodities that a consumer can purchase, given his money income and the price of two commodities. The equation of a budget line is given by: M=PX.
5. What is the law of diminishing marginal utility? Name 4 assumptions of law of diminishing marginal utility.
The Law of Diminishing Marginal Utility states that the consumption of each unit of property decreases as its use increases, while maintaining regular use of other items. MU becomes zero at a level where TU remains. This law explains that as a person consumes an item or a product, the satisfaction or utility that they derive from the product wanes as they consume more and more of that product. For example, an individual might buy a certain type of chocolate for a while.
The 4 views of the Service Reduction Act are:
Reasonable Consumer
Complete Information
Fixed Income and Prices
Private service
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