Unit 2: Theories of Consumer Behaviour — Online MCQ Test
ECONOMICS · CLASS 11 INTERMEDIATE 1 YEAR · Telangana State Board
Practice Unit 2: Theories of Consumer Behaviour with a free chapter-wise online MCQ test.
This chapter covers: This chapter details utility concept Cardinal Utility Law of Diminishing Marginal Utility Law of Equi-Marginal Utility Ordinal Utility Indifference Curve analysis consumer equilibr....
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Unit 2: Theories of Consumer Behaviour — Important Questions & Answers
What does utility mean in economics?
- A. The cost of producing a good
- B. The want-satisfying power of a good or service
- C. The market price of a good
- D. The physical weight of a commodity
Answer: B. The want-satisfying power of a good or service
Utility refers to the want-satisfying capacity of a commodity. It shows how much satisfaction a consumer gets from consuming a good or service.
Utility refers to the want-satisfying capacity of a commodity. It shows how much satisfaction a consumer gets from consuming a good or service.
According to the Law of Diminishing Marginal Utility, marginal utility generally:
- A. Increases with every additional unit consumed
- B. Remains constant for all units
- C. Decreases as more units of a good are consumed
- D. Becomes negative from the first unit
Answer: C. Decreases as more units of a good are consumed
The law states that as a consumer consumes more units of the same commodity, the additional satisfaction from each extra unit falls, assuming consumption is continuous.
The law states that as a consumer consumes more units of the same commodity, the additional satisfaction from each extra unit falls, assuming consumption is continuous.
If the marginal utility of money falls as a consumer spends more income, this supports which theory of consumer behaviour?
- A. Cardinal utility theory
- B. Ordinal utility theory
- C. Supply theory
- D. Cost theory
Answer: A. Cardinal utility theory
The cardinal utility approach measures utility in numerical terms and uses marginal utility of money in explaining consumer equilibrium.
The cardinal utility approach measures utility in numerical terms and uses marginal utility of money in explaining consumer equilibrium.
Which statement best distinguishes ordinal utility from cardinal utility?
- A. Ordinal utility measures satisfaction in exact numbers, while cardinal utility ranks preferences only
- B. Ordinal utility ranks preferences, while cardinal utility assumes utility can be measured numerically
- C. Both theories assume utility cannot be compared
- D. Cardinal utility applies only to money, not goods
Answer: B. Ordinal utility ranks preferences, while cardinal utility assumes utility can be measured numerically
Ordinal utility focuses on ranking combinations by preference, while cardinal utility assumes utility can be measured and compared in numerical terms.
Ordinal utility focuses on ranking combinations by preference, while cardinal utility assumes utility can be measured and compared in numerical terms.
Which one of the following is the correct condition for consumer equilibrium in the cardinal utility approach?
- A. MUx = MUy
- B. MUx/Px = MUy/Py = MU of money
- C. TUx = TUy
- D. Px = Py
Answer: B. MUx/Px = MUy/Py = MU of money
In cardinal utility analysis, equilibrium is achieved when marginal utility per rupee spent on each good is equal to the marginal utility of money.
In cardinal utility analysis, equilibrium is achieved when marginal utility per rupee spent on each good is equal to the marginal utility of money.