[CBSE 2005, 06, 09, AI 2005] Or NCERT Solutions for Class 6, 7, 8, 9, 10, 11 and 12. This is because, as seen before, each point on the ordinary demand curve corresponds to a different indifference curve of price consumption curve representing different levels of real income. Ans. When a consumer says he gets less satisfaction from second unit as compared to the first unit, it is expression in terms of ordinal utility. Explain the concept of Marginal Rate of Substitution (MRS) by giving an example. According to law of demand by increasing the price of a good its demand decreases but in case of petrol, its demand increases with the increase in price why? State any three factors which lead to increase in demand. (d) quantity demanded of goods and the relative prices of its complementary goods. Answer: Question 4. This will disturb the equality of marginal rate of substitution between Y and money, price of Y being constant. A movement along the demand curve for soft drinks is best described as: Explain the conditions of consumer’s equilibrium in case of (i) single commodity and (ii) two commodities. iv. To reach the maximum level of satisfaction the budget of the consumer has also to be kept in mind. (a) Shifts to the right. Hence, the market demand function will be. Answer: (b), Question 9. Similarly m case of decrease in demand, the demand curve will shift to the left to D2D2. With the rise in price, quantity demanded for the goods falls and it is known as decrease in demand. Q.14. Answer: (d), Question 11. Ans. [CBSE 2003, 2010] Share Your Word File ii. Question 1. Goods which can be used in place of each other are called substitute goods, for example tea and coffee. Unless the complementary good is a prestige good associated necessarily with the current good, Demand should fall & so cause a price reduction. Demands the quantity of a commodity that a consumer is willing to buy at a particular price in a given period of time. Answer: Question 5. What do you mean by a normal good? A good is a normal good for the consumer having lower income, may become an inferior good for a consumer having higher income. However, when there are more than two goods, a fall in the price of good X may not reduce the quantity demanded of Y; it may in fact increase the quantity purchased of good Y, if the two goods X and Y happen to be complements. Y is a substitute of X if a fall in the price of X leads to a fall in the consumption of Y; Y is a complement of X if a fall in the price of X leads to a rise in the consumption of Y; a compensating variation in income being made, of course in each case. “Y is complementary with X if the marginal rate of substitution of Y for money is increased when X is substituted for money in such a way as to leave the consumer no better off than before. Filed Under: CBSE Tagged With: CBSE 12 Micro Economics, CBSE 12 Micro Economics Demand. Thus, whereas along ordinary demand curve, a consumer’s money income remains constant, along compensated demand curve, his real income remains constant. Answer: (b), Question 8. Q.13. Demand of a commodity having close substitutes tends to be elastic. Further, the above Edge-worth-Pareto definition of complementary and substitute goods is based on the assumption that utility is measurable. Thus a fall in the price or X, combined with a compensated, variation in income, which must tend to increase the consumption of X itself (by the first substitution theorem), will increase the consumption of complements, but diminish the consumption of substitutes.”. Answer: Value: Awareness for efficient use of resources. Thus there is an inverse relation between the price and quantity demanded. Explain. The effect on demand for the good X will depend upon whether the related good whose price has risen is a substitute of X or complementary good for X. Due to rise in price of commodity x the demand of commodity y falls. Answer: (b), Question 7. Let the two goods be X and Y, given a certain consumption of X and Y, suppose consumer wants one more unit of X. It should be remembered that money stands for all other goods lumped together and is known as composite commodity. [1 Mark] demand for the good falls. [CBSE 2006] Q.25. (c) Coke and 7-UP will increase. It states that price of the commodity and quantity demanded are inversely related to each other, when other factors remain constant. Explain the factors affecting demand of a commodity. (b) a decrease in demand. (i) Any good whose demand falls with rise in income is called an inferior good. In case of inferior good, the rise in income will decrease the demand for the commodity and demand curve will shift to the left as shown in figure (2). What do you mean by complements? Answer: Complementary goods. Shortely direct relationship exists the income of a coustomer and demand of normal good.For example, a new car, new clothings. With the increase in income of the consumer, the demand has increased and the demand curve has shifted to D1D1 If the income of the consumer falls, the demand will also decrease and the demand curve will shift leftward to D2D2. (c) a change in quantity demanded. In Figure-1, DD is the original demand curve. It is defined as the percent change it the quantity, divided the percent change in the price. Ans. he enjoys maximum satisfaction here. As is seen from Fig. Question 10. (d) price effect ii. Suppose the price of good X falls and consumer’s money income is reduced by the compensating variation in income so as to wipe out the income effect.

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