What is an indifference curve? What are its important features? How do consumers reach equilibrium under indifference curve analysis?
What do you mean by marginal rate of substitution (MRS) among commodities? Why is it diminishing? How do you construct your budget line with various possible market baskets of food(F) and clothing(C), if you face a budget line given by F+2C=$80?
What is an Engel curve? What could be its possible slopes and why?
What are the effects of a fall in price of a commodity? Why do income and substitution effects occur simultaneously? How do you distinguish between the two?
How do you explain the theory of diminishing marginal utility? How does it explain why the demand curve for any product is downsloping? How does this theory help determine whether the demand for a product is elastic, or inelastic?
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There is inverse relationship between price and demand.
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