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Consider the demand for a good. At price Rs 4, the demand for the good is 25 units. Suppose price of the good increases to Rs 5, and as a result, the demand for the good falls to 20 units. Calculate the price elasticity.

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Important Questions on Theory of Consumer Behaviour

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Economics>Microeconomics>Theory of Consumer Behaviour>Elasticity of Demand
How does the budget line change if the price of good 2 decreases by a rupee but the price of good 1 and the consumer’s income remain unchanged?
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Economics>Microeconomics>Theory of Consumer Behaviour>Elasticity of Demand
Suppose there are 20 consumers for a good and they have identical demand functions: d(p) = 10 – 3p for any price less than or equal to 10/3 and d1(p) = 0 at any price greater than 10/3. What is the market demand function?
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Economics>Microeconomics>Theory of Consumer Behaviour>Elasticity of Demand
What do you mean by complements? Give examples of two goods which are complements of each other.
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Economics>Microeconomics>Theory of Consumer Behaviour>Elasticity of Demand
If a consumer has monotonic preferences, can she be indifferent between the bundles (10, 8) and (8, 6)?
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Economics>Microeconomics>Theory of Consumer Behaviour>Elasticity of Demand
Suppose your friend is indifferent to the bundles (5, 6) and (6, 6). Are the preferences of your friend monotonic?
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Economics>Microeconomics>Theory of Consumer Behaviour>Elasticity of Demand
What do you mean by substitutes? Give examples of two goods which are substitutes of each other.
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Economics>Microeconomics>Theory of Consumer Behaviour>Elasticity of Demand
Suppose a consumer wants to consume two goods which are available only in integer units. The two goods are equally priced at Rs 10 and the consumer’s income is Rs 40. (i) Write down all the bundles that are available to the consumer.
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Economics>Microeconomics>Theory of Consumer Behaviour>Elasticity of Demand
Suppose the price elasticity of demand for a good is –0.2. How will the expenditure on the good be affected if there is a 10 % increase in the price of the good?
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Economics>Microeconomics>Theory of Consumer Behaviour>Elasticity of Demand
Suppose there are two consumers in the market for a good and their demand functions are as follows: d1(p) = 20 – p for any price less than or equal to 20, and d1(p) = 0 at any price greater than 20. d2(p) = 30 – 2p for any price less than or equal to 15 and d1(p) = 0 at any price greater than 15. Find out the market demand function.
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Economics>Microeconomics>Theory of Consumer Behaviour>Elasticity of Demand
Consider the demand curve D(p) = 10 – 3p. What is the elasticity at price 5/3?
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Economics>Microeconomics>Theory of Consumer Behaviour>Elasticity of Demand
Suppose a consumer’s preferences are monotonic. What can you say about her preference ranking over the bundles (10, 10), (10, 9) and (9, 9)?
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Economics>Microeconomics>Theory of Consumer Behaviour>Elasticity of Demand
What do you mean by ‘monotonic preferences’?
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Economics>Microeconomics>Theory of Consumer Behaviour>Elasticity of Demand
Consider a market where there are just two consumers and suppose their demands for the good are given as follows: Calculate the market demand for the good.
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Economics>Microeconomics>Theory of Consumer Behaviour>Elasticity of Demand
What happens to the budget set if both the prices and the income double?
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Economics>Microeconomics>Theory of Consumer Behaviour>Elasticity of Demand
Explain price elasticity of demand.
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Economics>Microeconomics>Theory of Consumer Behaviour>Elasticity of Demand
What do you mean by an ‘inferior good’? Give some examples.
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Economics>Microeconomics>Theory of Consumer Behaviour>Elasticity of Demand
Suppose there was a 4 % decrease in the price of a good, and as a result, the expenditure on the good increased by 2 %. What can you say about the elasticity of demand?
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Economics>Microeconomics>Theory of Consumer Behaviour>Elasticity of Demand
Suppose the price elasticity of demand for a good is –0.2. If there is a 5 % increase in the price of the good, by what percentage will the demand for the good go down?
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Economics>Microeconomics>Theory of Consumer Behaviour>Elasticity of Demand
What do you mean by a normal good?
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Economics>Microeconomics>Theory of Consumer Behaviour>Elasticity of Demand
Suppose a consumer wants to consume two goods which are available only in integer units. The two goods are equally priced at Rs 10 and the consumer’s income is Rs 40. (ii) Among the bundles that are available to the consumer, identify those which cost her exactly Rs 40.