“Section A” Questions on Consumers Behaviour

1. If the price of commodity Y decreases, all other things remaining constant the consumer equilibrium quantity will
a. increase
b. decrease
c. remain constant
d. either increase or decrease

 

2. An increase in the price of Y will
a. increase the equilibrium quantity bought
b. decrease consumer equilibrium
c. leave no change to consumer equilibrium
d. result in zero equilibrium quantity

 

3. The decrease in the price of a commodity can be said to be
a. an increase in the level of real income
b. a decrease in the level of real income
c. an increase in the level of nominal income
d. a decrease in the level of consumer equilibrium

 

4. The movement along the same indifference curve is caused by
a. Changes in the combinations of the two commodities
b. Increase in the combinations of the two commodities
c. Increase in the prices of the two commodities
d. A decrease in the prices of the two commodities

 

5. The total effect of price change is the
a. the sum of both income and substitution effects
b. the sum of demand and supply
c. income effect minus substitution effect
d. total effect minus income effect

 

6. The concept of consumer surplus was first developed by
a. Alfred Marshall
b. Adam Smith
c. Richard Lipsey
d. John Keynes

 

7. When Consumer income increases and the demand for a particular product also increases, such a product can be regarded as
a. Abnormal
b. Normal
c. Inferior
d. Giffen

 

8. Consumer surplus
a. measures the difference between the sum of values that consumers place on their total consumption and the actual amount they pay
b. is the excess of product bought by the consumers
c. is the excess demand of the rich
d. is the total demand for a commodity

 

9. The concept of consumer surplus explained with the aid of the indifference curve was pioneered by
a. Alfred Marshall
b. J.R. Hicks
c. John Keynes
d. Adam Smith

 

10. In a monopolistic environment, a consumer will enjoy
a. Less consumer surplus
b. Higher consumer surplus
c. A constant level of consumer surplus
d. Zero levels of consumer surplus

“Section B” Questions on Consumers Behaviour

i. Use a graph to explain the concept of consumer surplus
ii. Explain your understanding of inferior, normal and essential goods.
iii. Explain your understanding of price change on the consumer equilibrium.
iv. Write short notes on the following:
a. Total price effect
b. Income effect
c. Substitution effect

Answers

1 – A
2 – B
3 – A
4 – A
5 – A
6 – A
7 – B
8 – A
9 – B
10 – A