Important Questions for Class 12 Economics Chapter 2 – Theory of Consumer Behaviour

1) Describe any 4 demand determinants for a commodity.

Ans – Check out the below demand determinants:

• Price of the Commodity: As a rule, with the price increase; the demand decreases and vice versa.

• Consumer Income: The demand for standard commodities will increase when the income among consumers rises.

• Related Goods Price: When the demand for extra goods decreases, linked goods experience a cost reduction. Regarding substitute goods, product demand will reduce the cost of other complementary goods.
• Consumer Preferences: A rise in consumer tastes and choices will increase product demand, while unfavorable changes may reduce product demand.

2) Define factors that influence market demand for a commodity.

Ans – The total quantity of the goods that every consumer of the market would like to purchase at varying prices in a specific period is what defines market demand. Several factors influence this demand are,

• Consumer Preferences: Modifications in fashion by different commodities or successful product advertising can increase demand.

• Consumer Income: Higher incomes can directly affect the demand as people have greater purchasing power and desire to buy more.

• Prices of Complementary Goods: The demand for a good is sensitive to the prices of substitutes, be it tea and coffee, or complementary items, which include cars and fuel.

• Consumer Expectation about Future Prices: Consumers may purchase more of an item now if prices increase suddenly to save money in the future.

• Population and Market Size: It’s calculated based on the approximate individual demand of potential consumers at various price levels. Increasing the population or size of consumers or potential buyers will lead to an increase in demand in the market.

3) Explain the ways of attaining equilibrium using indifference curve analysis.

Ans – A consumer attains equilibrium while achieving maximum satisfaction with a given income and prevailing prices. Consumer equilibrium is a situation wherein he attains maximum possible satisfaction from given income and existing price levels, studied in an indifference curve.

Explanation:

• The budget line, (AB) shows a line of spending on this item by the consumer.
• Equilibrium happens where the budget line is tangent to an indifference curve (e.g., where AB intersects IC).
• The indifference map (IC1, IC2, etc.) represents the preferences for the combinations of goods X and Y.

Assumptions in Indifference Curve Analysis:

• Rationality: The consumer requires maximum satisfaction based on the money they spend on the goods.
• Ordinal Utility: Consumers rank their choices based on the product quality.
• Consistent Choices: The consumer will make consistent product choices.
• Perfect Competition: May exist in the markets for these commodities.
• Total Utility: It depends on the quantity of goods consumed.

Consumers will reach maximum satisfaction levels at the tangent point, as it equates the preferences with the budget constraint.

NCERT Questions for Class 12 Economics Chapter 2 – Theory of Consumer Behaviour

In the field of economics, the theory of consumer behavior plays a crucial role in understanding how individuals make decisions regarding the purchase of goods and services. For students studying economics at the NCERT Class 12 level, mastering the concept of consumer behavior is essential. To help you prepare for your exams, here are some important questions that will test your knowledge of the theory of consumer behavior.