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WorksheetsIndifference curve Analysis
Total questions: 12
Worksheet time: 6mins
What is an indifference curve?
a representation to depict the demand & supply of goods.
a graph to show that the marginal utility of each commodity changes with changes in the price of goods.
a graph that depicts different combinations of two goods that provide a consumer with equal utility and satisfaction.
a representation to show consumer satisfaction in relation to the price of the goods.
Indifference curve analysis is based on the concept of .............................
Cardinal Utility
Ordinal Utility
Indifference curves are L-shaped when the
goods are perfect substitutes
goods are perfect complements
Imperfectly substitutable
One good is neutral good
If the two goods are perfect substitutes, the marginal rate of subsitution is
negative and constant
- 1
+ 1
none of the above
The slope of the indifference curve is
Marginal Rate of Substitution
- PX/PY
Marginal Rate of Technical Substitution
None of the above
If indifference curves are strictly convex, the consumer's equilibrium is attained where
IC is tangent to the budget line
MRS = PX/PY
both of the above
none of the above
As we move downward along an indifference curve, the slope if IC is
increasing
diminishing
constant
zero
Consider two goods X and Y. If Price of Good Y falls, the budget line becomes
steeper
flatter
remains the same
parallel to Y-axis
Which of the following is NOT true about ICs?
ICs are concave to origin
Higher IC represents higher level of satisfaction
ICs are non-intersecting
ICs reflect preferences of the consumer
When Px , PY and the income of the consumer double, the budget line will
pivot
shift outwards parallely
shift inwards parallely
remain unchanged
Which of the statements is NOT correct about income effect?
Income effect is negative for inferior goods
Income effect is negative for giffen goods
Income effect causes the budget line to shift parallelly
Income effect is always greater than substitution effect
Which of the following is NOT an assumption in Indifference Curve Analysis?
The consumer is rational
Consumer preferences are transitive
Consumer Preferences are consistent
Consumer does not spend his entire income
