A consumer has Rs 40 and both goods X and Y are priced at Rs 10 and are available in integer units a)give the bundles that this consumer can afford b) give the bundles that cost exactly Rs. 40
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NCERT Solutions for Class 12th Microeconomics : Chapter 2 – Theory of Consumer Behavior
by Neepur Garg April 22, 2019 Reading Time: 8min read
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NCERT Solutions for Class 12th Microeconomics Chapter 2 – Theory of Consumer Behavior
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National Council of Educational Research and Training (NCERT) Book Solutions for class 12th
Subject: Economics
Chapter: Chapter 2 – Theory o Consumer Behavior
These Class 12th NCERT Solutions for Economics provide detailed, step-by-step solutions to all questions in an Economics NCERT textbook.
CLICK HERE for Class 12 Economics Notes.
Class 12th Economics Chapter 2 – Theory of Consumer Behavior NCERT Solution is given below.
Question 1. What do you mean by the budget set of a consumer?
Answer Budget set is a set of all possible combinations of the set of two goods, which a consumer can afford at given price and income.
Question 2. What is budget line?
Answer Budget line represents different possible combinations of two goods which can be purchased by consumer with given income and prices, and the cost of each of these combinations is equal to the income of consumer.
Question 3. Explain why the budget line is downward sloping.
Answer The budget line is downward sloping because when more and more units of one good can be bought, it leads to decrease some units of
other good with the given income.
Question 4. A consumer wants to consume two goods. The prices of two goods are Rs 4 and Rs 5 respectively. The consumer’s income is Rs 20.
(i) Write down the equation of budget line.
(ii) How much of good 1 can the consumer consume if she spends her entire income on that goods?
(iii) How much of good 2 can she consume if she spends her entire income on that goods?
(iv) What is the slope of the budget line?
Answer (i) Assume Good 1 be X and Good 2 be Y
Price of X = Rs 4 (P= Rs 4)
Price of Y= Rs 5 (P= Rs 5)
Income of the consumer= Rs 20
Budget line = Px + Py = Income
Budget line will be 4X + 5Y = 20
Budget line= Money spent= Income
(ii) If she spends her entire income on good 1 (X) then the consumption of good 2 (Y) will be zero.
Budget line = Px + Py= Income(from(i)
4X + 5(0) = 20
X = 20/4 = 5 units
(iii) If she spends her entire income on good 2 (Y). then the consumption of good 1 (X) will be zero.
Budget line =Px + Py = Income (from (i)
4(0)+5Y= 20
Y = 20/5 = 4 units
(IV) Slope of budget line = Units of good 1 Willing to sacrifice/units of good 2 willing to gain
= -ΔPx/ΔPy = -4/5=-0.8
Note Sacrificed units always have negative value