Match List-I with List-II
List-I List-II (A) Consumer's income changes, but prices remain unchanged. The equation of the budget line. (I) p₁ x₁ + p₂ x₂ = M' (B) Marginal Rate of Substitution (MRS) (II) p'₁ x₁ + p₂ x₂ = M (C) The price of a commodity changes, but income remains unchanged. The equation of the budget line. (III) Δ Y/ΔX (D) Total Utility (IV)
Choose the correct answer from the options given below:
Match List-I with List-II
| List-I | List-II |
|---|---|
| (A) Consumer's income changes, but prices remain unchanged. The equation of the budget line. | (I) p₁ x₁ + p₂ x₂ = M' |
| (B) Marginal Rate of Substitution (MRS) | (II) p'₁ x₁ + p₂ x₂ = M |
| (C) The price of a commodity changes, but income remains unchanged. The equation of the budget line. | (III) Δ Y/ΔX |
| (D) Total Utility | (IV) |
Choose the correct answer from the options given below:
Solution
1. Shift in Consumer's Income (A matches with I)
The standard budget line equation is , where represents the price of the goods, represents the quantity, and stands for the consumer's total income. If prices are constant but the income changes to a new amount (denoted as ), the formula updates to reflect the new income: .
2. Marginal Rate of Substitution - MRS (B matches with III)
MRS measures how much of one good (Good Y) a consumer is willing to give up to get an additional unit of another good (Good X) without changing their overall satisfaction. It is calculated as the ratio of the change in the quantity of Good Y to the change in the quantity of Good X, written as .
3. Change in the Price of a Commodity (C matches with II)
When the consumer's income () remains fixed but the price of a good changes, the budget line pivots. For instance, if the price of the first good changes from to a new price , the revised budget line equation becomes .
4. Total Utility (D matches with IV)
Total Utility is the overall satisfaction derived from consuming a specific quantity of a commodity. It is simply the sum total of the Marginal Utilities () gained from each successive unit consumed. The formula is: .
Conclusion:
Following this logic, the correct matching sequence is (A) - (I), (B) - (III), (C) - (II), (D) - (IV).
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