CBSE Class 12 Economics Indifference Curve Analysis Worksheet

I. Answer in one sentence or in one word

a. An indifference curve shows:

A. The amount of money that consumer has to spend on two goods.

B. The different levels of utilities that consumer can get from the consumption of different units of two goods.

C. The maximum quantity of two goods that the economy can produce with given level of technology and a given resources.

D. Different combination of two goods that consumer can purchase that gives same level of utility.

b. Define a consumption bundle.

c. Slope of indifference curve indicates:

A. Marginal Rate of transformation B. Marginal Utility

C. Marginal Rate of substitution D. Opportunity Cost

d. What does a consumption bundle on the budget line indicate?

e. What happens to the slope of the budget line if price of good2 increases?

II. Answer in around 60 words.

a. Define an indifference curve. Explain with a diagram.

b. What are the properties of an indifference curve? State the reason behind each property.

c. What is an indifference map? What does it signify?

d. A consumer has Rs. 20 to spend on two goods, good1 and good2. Price of both the goods is Rs. 4 per unit. Derive all the consumption bundles if the goods are available only in integer units. Among the consumption bundles identify the consumption bundles that lie on the budget line.

Q1 A consumer wants to consume 2 goods. The price of the goods are Rs 4 &Rs 5 respectively. The consumer’s income is Rs 20.

(1) Write the equation of budget line

(2) How much of good 1 can a consumer consume if he spends his entire income on that good 

(3) How much of good 2 can a consumer consume if he spends his entire income on that good

(4)Give the Slope of the budget line

Q2 How does the budget line change if the consumer’s income increases to Rs 40 but the prices remain unchanged in the above Q?

Q3 How does the budget line change if the price of good 2 decreases by 1 rupee and the price of good 1 and consumer income remains the same ?Draw diagram

Q4 What happens to the budget set if both the prices as well as the income double? Draw diagram 

Q5 Suppose, a consumer can afford to buy 6 units of good A and 8 units of good B if he spends his entire income. The prices of two goods are Rs 6 and Rs 8 respectively. How much is the consumer’s income? 

Q6 Suppose, a consumer wants to consume two goods which are available only in integer units. The two goods are equally priced at Rs 10 & consumer income is Rs 40

(1) Write down all the bundles that are available to the consumer

(2) Among the bundles that are available to the consumer. identify those which cost him exactly Rs.40

Q7 If a consumer has monotonic preferences, can he be indifferent between bundles (10, 8) and (8,6) ?

Q8 What do you mean by monotonic preferences?

Q9 Suppose a consumer’s preference is monotonic, what can you say about his preference ranking over the bundles (10, 10) (10, 9) (9, 9)?

Q10 Suppose your friend is indifferent between two bundles (5,6) and (6,6). Are the preferences of your friend monotonic?

Q11 State and explain the properties of indifference curves.

Q12 What are the conditions of consumer ‘s equilibrium under the indifference curve approach? What changes will take place if the conditions to reach equilibrium are not fulfilled?