Chapter Exam

Unit 2: Theories of Consumer Behaviour — Online MCQ Test

Q: What does utility mean in economics?

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.

Q: According to the Law of Diminishing Marginal Utility, marginal utility generally:

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.

Q: If the marginal utility of money falls as a consumer spends more income, this supports which theory of consumer behaviour?

Answer: A. Cardinal utility theory — The cardinal utility approach measures utility in numerical terms and uses marginal utility of money in explaining consumer equilibrium.

Q: Which one of the following is the correct condition for consumer equilibrium in the cardinal utility approach?

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.

ECONOMICS · CLASS 11 INTERMEDIATE 1 YEAR · Telangana State Board

Practice Unit 2: Theories of Consumer Behaviour with a free chapter-wise online MCQ test for Telangana State Board CLASS 11 INTERMEDIATE 1 YEAR ECONOMICS. 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.... AI-generated questions from basic to board-exam level, with instant results and explanations.

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Unit 2: Theories of Consumer Behaviour — Important Questions & Answers (FAQ)

Frequently asked questions from Telangana State Board CLASS 11 INTERMEDIATE 1 YEAR ECONOMICS — Unit 2: Theories of Consumer Behaviour, with answers and explanations. These are sample questions; the exam has its own separate question set.

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.

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.

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.

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.

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.

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