NCERT Solutions for Class 12 Economics I Chapter 2 Theory of Consumer Behaviour – Here are all the NCERT solutions for Class 12 Economics I Chapter 2. This solution contains questions, answers, images, explanations of the complete chapter 2 titled Theory of Consumer Behaviour taught in Class 12. If you are a student of Class 12 who is using NCERT Textbook to study Economics I, then you must come across chapter 2 Theory of Consumer Behaviour. After you have studied lesson, you must be looking for answers of its questions. Here you can get complete NCERT Solutions for Class 12 Economics I Chapter 2 Theory of Consumer Behaviour.
NCERT Solutions Class 12 Economics Chapter 2 Theory of Consumer Behaviour
Here on AglaSem Schools, you can access to NCERT Book Solutions in free pdf for Economics for Class 12 so that you can refer them as and when required. The NCERT Solutions to the questions after every unit of NCERT textbooks aimed at helping students solving difficult questions.
For a better understanding of this chapter, you should also see summary of Chapter 2 Theory of Consumer Behaviour , Economics, Class 12.
Class | 12 |
Subject | Economics |
Book | Introductory Microeconomics |
Chapter Number | 2 |
Chapter Name |
Theory of Consumer Behaviour |
NCERT Solutions Class 12 Economics chapter 2 Theory of Consumer Behaviour
Class 12, Economics chapter 2, Theory of Consumer Behaviour solutions are given below in PDF format. You can view them online or download PDF file for future use.
Theory of Consumer Behaviour
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Download NCERT Solutions Class 12 Economics chapter 2 Theory of Consumer Behaviour In PDF Format
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Question & Answer
Q.1: What do you mean by the budget set of a consumer?
Ans : It refers to the set of consumption bundles that are available to or affordable by the consumer; while being aware of his/her income-level and the existing market prices.
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Q.2: What is budget line?
Ans : A budget line represents the different combinations of two goods that are affordable and are available to a consumer; while being aware of his/her income-level and market prices of both the goods. \(\begin{array}{l}{\text { Let } x_{1} \text { be the amount of good } 1 \text { . }} \\ {x_{2} \text { be the amount of good } 2 \text { . }} \\ {P_{1} \text { be the price of good } 1} \\ {P_{2} \text { be the price of good } 2 \text { . }}\end{array}\) \(\begin{array}{l}{\mathrm{P}_{1} \mathrm{x}_{1}=\text { Total money spent on good } 1} \\ {\mathrm{P}_{1} \mathrm{x}_{2}=\text { Total money spent on good } 2} \\ {\text { Then, the budget line will be: }} \\ {\mathrm{P}_{1} \mathrm{x}_{1}+\mathrm{P}_{2} \mathrm{x}_{2}=\mathrm{M}}\end{array}\) All the consumption bundles on the budget line cost the consumer exactly the equivalent of hi/her income.
Q.3: Explain why the budget line is downward sloping.
Ans : The budget line is a negatively downward sloping line. The slope of a budget line measures the amount of good 2 that must be sacrificed in order to get an additional unit of good 1, as the consumer’s income (M) is fixed. The budget line is downward sloping because, in order to increase the consumption of one good, the consumption of the other good must be reduced, with constant M. The slope of the budget line is \(\frac{-P_{1}}{P_{2}}=\frac{\Delta x_{2}}{\Delta x_{1}}\), which implies the rate of exchange or the rate at which good 2 can be substituted for good 1.
Q.4: A consumer wants to consume two goods. The prices of the two goods are Rs 4 and Rs 5 respectively. The consumer’s income is Rs 20.
(i) Write down the equation of the budget line.
(ii) How much of good 1 can the consumer consume if she spends her entire income on that good?
(iii) How much of good 2 can she consume if she spends her entire income on that good?
(iv) What is the slope of the budget line?
Ans : \(\begin{array}{l}{\text { (i) } P_{1}=\operatorname{Rs} 4} \\ {P_{2}=R s 5} \\ {M=R s 20} \\ {\text { Equation of the budget line }=P_{1} x_{1}+P_{2} x_{2}=M} \\ {4 x_{1}+5 x_{2}=20}\end{array}\) (ii) If Rs 20 is entirely spent on good 1, then the amount of good 2 demanded will be zero i.e., x2 = 0 as the consumer has no income left to spend on good 2. \(\begin{array}{l}{4 \mathrm{x}_{1}+5(0)=20} \\ {4 \mathrm{x}_{1}=20} \\ {x_{1}=\frac{20}{4}} \\ {x_{1}=5} \\ {\text { Amount of good 1 consumed }=5 \text { units }}\end{array}\) (iii) If Rs 20 is entirely spent on good 2, then x1 = 0, as the consumer has no income left to spend on good 1. \(\begin{array}{l}{4(0)+5\left(x_{2}\right)=20} \\ {5\left(x_{2}\right)=20} \\ {x_{2}=\frac{20}{5}} \\ {x_{2}=4 \text { units }} \\ {\text { Amount of good } 2 \text { consumed }=4 \text { units }}\end{array}\) (iv) Slope of the budget line = \(\frac{-P_{1}}{P_{2}}\) \(=\frac{-\text { Price of good } 1}{\text { Price of good } 2}=-\frac{4}{5}=-0.8\)
Q.5: How does the budget line change if the consumer’s income increases to Rs 40 but the prices remain unchanged?
Ans : \(\begin{array}{l}{\mathrm{M}_{2}=\mathrm{Rs} 40} \\ {\mathrm{P}_{1}=\mathrm{Rs} 4} \\ {\mathrm{P}_{2}=\mathrm{Rs} 5} \\ {\text { Initial equation of the budget line: }} \\ {4 \mathrm{x}_{1}+5 \mathrm{x}_{2}=20} \\ {\text { New equation of the budget line: }} \\ {4 \mathrm{x}_{1}+5 \mathrm{x}_{2}=40}\end{array}\) As M has increased, the consumer can now purchase more of both the goods and the budget line will shift parallelly outwards to A’B’ from AB. Horizontal intercept will be \(=\frac{M}{P_{2}}=\frac{40}{4}=10\) Vertical intercept will be \(=\frac{M}{P_{2}}=\frac{40}{5}=8\) The slope of the new budget line will be the same as that of the old budget line. \(-\frac{P_{1}}{P_{2}}=\frac{4}{5}\)
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NCERT / CBSE Book for Class 12 Economics
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