Budget Line and Indifference Curve Micro Economics Class 11 /12

Class 12/11

Micro Economics 

Chapter Indifference Curve and Budget line

Pankaj Bhanwani

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Q1 The price of good x is Rs 5 each and price of good Y is 0.50 paise each and I receive a income of Rs 15 Plot the budget line

Q2 My Income rises to Rs 20 which good/goods , will have to change price in order to restore my original budget line 

Q3 My Income falls to Rs 5 What is my new budget line

Q4 If all prices are multiplied by P by how much Income should be multiplied to restore the original budget line

Q5 Now suppose a budget line which is curved What does it mean 

Q6 The price of Y doubles and price of X is now 1/3 of its previous value and the income remains the same Will the consumer be able to move on the higher IC ( Yes/No)

Q7 Which of the following is true along an individual’s indifference curve for ordinary goods?

a. The slope is constant.

b. Total utility changes.

c. The individual is indifferent between any two points.

d The slope is equal to the ratio of the prices of the

consumption bundles.

e. The individual doesn’t care if utility is maximised

Q8 Which of the following is/are true of indifference curves for ordinary goods?

I. They cannot intersect.

II. They have a negative slope.

III. They are convex.

a.  I only

b. II only

c. III only

d. I and II only

e. I, II, and III

Q9. Moving from left to right along an indifference curve, which of the following increases?

a. The marginal utility of the vertical axis good

b. The marginal utility of the horizontal axis good

c. The absolute value of the slope

d. The marginal rate of substitution

e. The demand for the vertical axis good

Q10 Each of the combinations of iPod song downloads and DVD rentals shown in the table below give Johny an equal level of utility.

iPod songs	DVD Rentals
0	10
1	8
2	6
3	4

1. Graph Johny indifference curve.

b. Economists believe that the individual indifference curves

for ordinary goods exhibit what two properties?

c. Does  indifference curve exhibit the two

properties from part b? Explain.