TN STATEBOARD 11th ECONOMICS – CHAPTER 2 – CONSUMPTION ANALYSIS ADDITIONAL QUESTIONS
I. MULTIPLE CHOICE QUESTIONS. 1 MARK
1. What is the beginning of economic Science? Consumption
2. What is the End of Production? Consumption
3. What are goods which are not essential but very costly
called? Luxury
4. Who formulated the law of diminishing marginal utility? H.H. Gossen
5. Who perfected the law of diminishing marginal utility? Marshall
6. The law of diminishing marginal utility is also called
Gossen’s Law
7. Who Stated “Production dance to the Consumer’s Tune?” Wonnacott
8. The use of goods and services for satisfying human wants
is called Consumption
9. Who Used Cardinal Analysis? Marshall
10. In the law of diminishing marginal utility, total
utility is increasing but at a Decreasing
rate
11. When TU diminishes, MU is Negative
12. What are the exceptions to the law of diminishing
marginal utility? Hobbies, misers, readings.
13. What is the fundamental law of consumption? Law of
diminishing MU
14. Who uses law of diminishing MU? Finance Minister
15. The law of diminishing MU is the basis for Progressive taxation.
16. The MU of money to the rich is Low
17. Who have the diamond water paradox? Adam
Smith
18. Who modified consumers’ surplus? Jevons
and Dupuit
19. Who first stated the law of demand? Augustin Cournot
20. There is Inverse relationship between price and the quantity demanded.
21. What is the shape of the demand curve? Negative Slope
22. Taxation will
increase the price
23. Subsidy will
decrease the price.
24. Supply and demanded are Price Related.
25. When income increases demand for durables? Increases
26. Demand Curve slopes downward due to Price effect.
27. What is the shape of the exceptional demand curve? Upward
29. What influences the movement of the demand curve? Price
30. How many methods are there to measure price elasticity
of demand? Three
31. What are inter related goods? Substitutes, Complementary Goods
32. Demand Curve is a straight horizontal line under perfectly elastic demand
33. Demand Curve is a Vertical straight line under perfectly inelastic demand
34. When did Hicks publish his book? 1939
35. The Indifference curve analysis was presented by J.R.Hicks
36. Give potential price is Rs.375 and the actual price is
Rs.200. Find the consumer surplus.
175
37. Human wants have the capacity to get satisfied only temporarily
38. Higher Indifference curve indicates higher level of Satisfaction
39. The point of Intersection of demand and supply curves is
known as Equilibrium
40. Human wants are classified in to Necessaries, Comforts and Luxuries
41. The Segment of a demand curve between two points is
called Arc
42. Cardinal Utility Analysis is the other name given for Marshallian Utility analysis.
43. The Equi-marginal principle is quite useful in
explaining the”Water Diamond paradox”
44. Giffen’s goods are classified in to Superior and Inferior goods
45. There are five
kinds of price elasticity of demand
46. Price is a
powerful factor that influence demand
47. What does Px denotes? Price of a Commodity
48. If the Co-efficient elasticity is equal to zero it
represents perfectly inelastic
Supply
49. What influences the demand curve to shift? Income, Taste, Price
50. Demand is a rectangular hyperbola under Unitary elastic.
II.
VERY SHORT ANSWER QUESTION. 2MARKS
1. Define “Consumption”?
Answer:
Consumption plays an important role in Economics. “Consumption is the
sole end and object of economic activity” – J.M. Keynes. Consumption is the
beginning of economic science. In the absence of consumption, there can be no
production; exchange, or distribution. Consumption is also an end of
production. Producers produce goods to satisfy the wants of the people.
2. What is the law of demand?
Answer:
“The quantity demanded increases with a fall in price and diminishes
with a rise in price” – Marshall.
3. Write the characteristics of demand?
Answer:
Characteristics of demand:
Price: Demand is always related to price.
Time: Demand always means demand per unit of time, per day, per week,
per month on per year.
Market: Demand is always related to the market, buyer and sellers.
Amount: Demand is always a specific quantity that a consumer is willing
to purchase.
4. What is marginal utility?
Answer:
Marginal utility is the utility derived from the last or marginal unit
of consumption.
5. What is demand?
Answer:
Demand is the desire backed by the ability to pay and the willingness to
buy it.
6. What is elasticity of demand?
Answer:
Elasticity of demand is the degree of responsiveness of the quantity
demand for a commodity to a change in its price.
7. What are the determinants of elasticity of demand?
Answer:
Availability of substitutes
Proportion of consumer’s income
Number of uses of commodity
Complementarity between goods.
8. Glossary Pg.no 47 and 48
Consumption: The use of goods and services for
satisfying one’s wants.
Demand: Demand is desire backed by sufficient
purchasing power and willingness to spend on it.
Needs: It is defined as goods or services that are
required. This would include the needs for food, clothing, shelter and health
care.
Utility: Utility is the capacity of a commodity to
satisfy human wants.
Marginal utility:
Marginal utility is the utility derived from the
last or Marginal unit of consumption.
Elasticity of Demand:
The Elasticity of Demand refers to the rate of
change in demand due to a given change in price.
Consumer’s Surplus:
The difference between the potential price and
actual price.
Indifference Curves:
ICs means all those combinations of any two goods
which give equal satisfaction to the consumer.
Indifference Map:
A set of indifference curves upper ICs denoting
higher and lower ICs lesser level of satisfaction.
Price line or Budget line:
The line joining various combination of the two
goods which the consumer can buy at given prices and income.
Consumer’s Equilibrium:
It refers to a situation under which a consumer
spends his entire income on purchase of a goods in such a manner that it gives
him maximum satisfaction and he has no tendency to change it.
III.
SHORT ANSWER QUESTION. 3MARKS
1.
What is an
indifference map?
Answer:
An indifference map is a family or collection or set of
indifference curves corresponding to different levels of satisfaction. In the
diagram, the indifference curves IC1, IC2 and IC3 represent the indifference map, upper IC representing a
higher level of satisfaction compared to lower IC.
2. Write the importance
of the law of diminishing marginal utility?
Answer:
1.
This law
of DMU is one of the fundamental laws of consumption. It has applications in
several fields of study.
2.
The law
of DMU is the basis for other consumption laws such as the law of Demand,
Elasticity of Demand, Consumer Surplus, and the Law of Substitution, etc.
3.
The law
emphasizes the equitable distribution of wealth. The MU of money to the more
-moneyed is low. Hence redistribution of income from rich to poor is justified.
4. What are the determinants of demand?
Answer:
1.
Changes
in tastes and fashions
2.
Change in
weather
3.
Taxation
and subsidy
4.
Change in
expectations
5.
Changes
in savings
6.
State of
trade activity
7.
Advertisement
8.
Change in
income
9.
Change in
population.
5. What
is a scale of preference?
Answer:
1.
A
rational consumer usually prefers the combination of goods which gives him a
maximum level of satisfaction.
2.
Thus the
consumer can arrange goods and their combination in order of their
satisfaction.
3.
Such an
arrangement of a combination of goods in the order of level of satisfaction is
called the “Scale of preference”.
6. Draw
an indifference curve with the help of indifference schedule.
Answer:
Book Pg.No. 44
7. Write
any 3 importance of Elasticity of demand.
IV.
LONG ANSWER QUESTION. 5MARKS
1. Describe the features of Human Wants.
a. Wants are unlimited Human wants are countless in
number and various in kinds. When one want is satisfied another want crops up.
Human wants multiply with the growth of civilization and development.
b. Wants become habits
Wants become habits; for example, when a man starts
reading newspaper in the morning, it becomes a habit.
Same is the case with drinking tea or chewing pans.
c. Wants are Satiable
Though we cannot satisfy all our wants, at the same
time we can satisfy particular wants at a given time. When one feels hungry, he
takes food and that want is satisfied.
d. Wants are Alternative
There are alternative ways to satisfy a particular
want eg. Idly, dosa or chappathi.
e. Wants are Competitive
All our wants are not equally important. So, there
is competition among wants. Hence, we have to choose more urgent wants than
less urgent wants.
f. Wants are Complementary
Sometimes, satisfaction of a particular want
requires the use of more than one commodity. Example:
Car and Petrol, Ink and Pen.
g. Wants are recurring
Some wants occur again and again. For example, if we
feel hungry, we take food and satisfy our want. But after sometime, we again
feel hungry and want food.