Theory of consumer behaviour — Economics STD 12 Humanities & Commerce — Question

1. When marginal revenue is constant and not equal to zero, then total revenue will also be constant.
2. As soon as marginal cost starts rising, average variable cost also starts rising.
3. Total product always increases whether there is increasing returns or diminishing returns to a factor.

Distinguish between marginal propensity to consume and marginal propensity to save. What is the relation between the two?

OR

What is marginal propensity to consume? How is it related to marginal propensity to save?

What is a barter system? What are its drawbacks?

From the following data calculate national income by (a) income method and (b) expenditure method:

S.No.		Rs.(in crores)
1	Private final consumption expenditure.	2,000
2	Net capital formation.	400
3	Change in stock.	50
4	Compenstation of employees.	1,900
5	Rent.	200
6	Interest.	150
7	Operating surplus.	720
8	Net indirect tax.	400
9	Employers' contribution to social security schemes.	100
10	Net exports.	20
11	Net factors income from abroad.	-20
12	Government final consumption expenditure.	600
13	Consumption of fixed capital.	100

Complete the following table:

Output (Units)	Total Cost (₹)	Average Variable Cost (₹)	MC (₹)
1	90	-	30
2	-	27	-
3	-	-	27
4	180	30	-

A consumer consumes only two goods X and Y both priced at ₹ 3 per unit. If the consumer chooses a combination of these two goods with Marginal Rate of Substitution equal to 3, is the consumer in equilibrium? Give reasons. What will a rational consumer do in this situation? Explain.

Complete the following table:

Output Units	Marginal Cost ₹	Average Variable Cost ₹	Total Cost ₹	Average Fixed Cost ₹
1	60	..........	120	..........
2	..........	..........	174	..........
3	..........	54	..........	..........
4	54	..........	..........	15
5	..........	57	345	..........

How should the following be treated in estimating national income of a country? You must give reason for your answer.

1. Taking care of aged parents.
2. Payment of corporate tax.
3. Expenditure on providing police services by the government.

Will the following be included in the domestic product of India? Give reasons for your answer.

1. Profits earned by foreign companies in India.
2. Salaries of Indians working in the Russian Embassy in India.
3. Profits earned by a branch of State Bank of India in Japan.

Explain the effect of the following on the market demand of a commodity:

1. Change in price of related goods.
2. Change in the number of its buyers.