Micro

Consumer Behaviour

Medium

Arrange the following concept emerges in context of consumer equilibrium.

(A) Transfer his expenditure from Good Y to Good X.

(B) Sacrifice more of Good Y to gain Good X.

(C) Till, Marginal Rate of Substitution (MRSxy) = Market Rate of Exchnage.

(D) Suppose, Marginal Rate of Substitution (MRSxy) > Market Rate of Exchnage.

Choose the correct answer from the options given below:

(A), (B), (C), (D)

(D), (B), (A), (C)

(B), (A), (D), (C)

(C), (B), (D), (A)

✅ Correct Option: 2

Option 1 -> This sequence starts with transferring expenditure, which is not the initial condition in consumer equilibrium analysis.

Option 2 -> This follows the logical process: Starting with disequilibrium (MRSxy > Market Rate), leading to sacrifice of Y for X, transferring expenditure from Y to X, until equilibrium is reached (MRSxy = Market Rate).

Option 3 -> This sequence incorrectly places sacrifice before the initial condition of disequilibrium.

Option 4 -> This sequence starts with equilibrium condition, which should be the final outcome, not the starting point.

Hence, Option 2: (D), (B), (A), (C) -> In consumer equilibrium theory, the correct logical sequence is: First, we observe the disequilibrium condition where MRSxy > Market Rate of Exchange (D) - meaning consumer values good X more than market price suggests. This triggers the consumer to sacrifice more of Good Y to gain Good X (B). Practically, this means transferring expenditure from Good Y to Good X (A). This adjustment process continues till equilibrium is achieved where MRSxy = Market Rate of Exchange (C), representing optimal consumer choice. -> correct

2025: 27 May Shift 2

An increase in the price of socks is likely to decrease the demand for shoes and a decrease in the price of socks is likely to increase the demand for shoes. Socks and shoes are:

2025: 15 May Shift 1

Which of the following are true about indifference curves?

(A) All the points lying on an indifference curve provide the consumer with different levels of satisfaction.

(B) Indifference curves are convex to the origin due to law of Diminishing Marginal Rate of Substitution.

(D) In the case of perfect substitutes, indifference curves are straight lines.

Choose the correct answer from the options given below:

2023: 29 May Shift 2

Suppose an Individual buys 15 units of good when its price is Rs 5 per unit. What will happen to his demand when price of the good increases to Rs 7 per unit and elasticity of demand for the good is 0.5

2025: 14 May Shift 1

Identify the correct statements with regard to the consumer's budget line/set.

(A) A decrease in the price of goods makes the budget line steeper

(B) A decrease in the price of goods makes the budget line flatter

(D) All bundles in the positive quadrant which are on or below the line are included in the budget set.

2022: 19 July Shift 2

The price and quantity at a point on the demand curve of a good are given as 10 and 50 respectively. If the price is changed to 6 and as a result quantity changes to to 65, how do you explain the change.

2025: 29 May Shift 2

The exceptional case in optimal choice of the consumer is where ..................

Solution

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