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The Consumer is not in equilibrium because :

MRS> P_x/P_y or 3> 4/2

Since the consumer is prepared to pay more for X than market demands, consumer will buy more of X and less of Y till MRS decline enough to be equal to Px/Py and consumer reaches equilibrium.

The Consumer is not in equilibrium because:

MRS> Px/Py or 2>5/4

The consumer is prepared to pay more for one more unit of X than market demands. So, he will buy more of X and less of Y till MRS falts enough to be equal to P_x/P_y and consumer is in equilibrium again.

The Consumer is not in equilibrium because:

MRS> P_x/P_y or 3/4

Since the consumer is willing to pay more for Good X than the market requires, the consumer will buy more of Good X and less of Good Y, continue to do so till MRS declines enough to become equal to P_x/P_y.

Yes. Complementary goods often exhibit low elasticity of demand. Because, increase or decrease in the demand for Good-1 causes a simultaneous increase or decrease in the demand for Good-2 even when price of Good-2 has not changed.

Yes. From a point of intersection of the demand curve, flatter the curve, more elastic it is. Because, for a given change in P_X, (at the point of intersection) flatter demand curve shows greater change in Q_X.

No. A vertical straight line demand curve parallel to Y-axis shows no change in the demand irrespective of change in price.

No. Luxuries of life have greater elasticity of demand. Change in their prices has a great effect on their demand. Because, these goods are not essentials of life.

No. A horizontal straight line demand curve parallel to X-axis shows infinite elasticity of demand (E_d = ∞).

An Indifference Curve slopes downwards because increase in units of one good required a decrease in the number of unit of another good to maintain the same level of satisfaction

The three properties of Indifference Curves are:

(i) An IC slope downward from left to right: It is because to consume more quantity of one good, some quantity of the other goods must be reduced because the utility level remains the same.

(ii) An IC is convex towards origin: It is consumed of one good because  MRS declines as more 

(iii) An IC to the right represents a higher level of Satisfaction: It is because an IC to the right show more units of goods consumed and more units of goods are assumed to have more utility.

Detailed Answer:

Properties of Indifference Curve:

(i) Indifference Curves are negatively sloped or they slope downwards: It shows that more of one commodity implies less of the other so that the total satisfaction (at any point on Indifference Curve) remains the same.

(ii) Indifference Curves are convex to the point of origin: An Indifference Curve will ordinarily be convex to the origin. This is because of Diminishing Marginal Rate of Substitution.

(iii) Indifference Curve neither touches X-axis nor Y-axis: It is often assumed that a consumer buys a combination of two goods. Hence, an Indifference Curve neither touches X-axis nor Y-axis.

(iv) Indifference Curves never touch or intersect each other: Each indifference Curve represents a different level of satisfaction. So, their intersection is ruled out.

(v) Higher Indifference curve represents higher level of satisfaction: This is based on the assumption of monotonic preferences which means that greater consumption of a commodity by the consumer gives a higher level of satisfaction.

Moving along an indifference curve, we find that MRS tends to diminish.

(i) It slopes downwards from left to right.

(ii) Indifference Curves are convex to the origin.

(iii) Indifference Curves will never intersect each other.

(iv) A higher Indifference Curve represents a higher level of satisfaction.

(v) Indifference Curve neither touches X-axis nor y-axis.

Yes. Elasticity of demand will be high at higher level of price of the commodity. Because corresponding to higher level of P_X, the ratio (lower segment/upper segment)  tends to be high.

It refers to a set of indifference curves corresponding to different income levels of the consumers. An indifference curve which is to the right and above another indifference curve corresponds to the higher level of income and therefore, represents higher level of satisfaction.

Irrdifference Curves are always convex to the origin because of the Diminishing Marginal Rate of Substitution

When supply of a commodity increases without any increase in price of the commodity, it is known as the situation of increase in supply. Increase in supply occurs when quantity supplied increases due to determinants other than price of the concerned commodity.

Let P_x= P_y=10

Income :40

(i) Bundles available to consumer are:

(0,0), (0,1), (0,2), (0,3), (0,4), (L,0), (1,1), (1.,2), (1,3), (1,4), (2,0), (2,1), (2,2), (3,0), (3,1) and (4,0).

(ii) (0,4), (1.,3), (2,2), (3,1) and (4,0) cost exactly 40. All other bundles cost less than Rs.40

The price elasticity of demand is the degree of responsiveness of quantity demanded of a commodity to the change in its price.

At the mid-point of straight line downward sloping demand curve, elasticity of demand = 1 (one)

Yes. Higher indifference curve shows higher level of satisfaction. Because, higher IC corresponds to higher level of income of the consumer or higher level of consumption of both goods X and Y.

No. Extension and contraction of supply are related to own price of the commodity, other factors remaining constant.

(i) Let the two goods be X and Y. We are given Px =Rs. 4, Py= Rs.5, Consumer's income (M) =Rs. 20.

Budget line equation is : PxX +PyY = M

or=>4x+5y=29

(ii) If quantity consumed of Good Y = 0,

Budget equation becomes :

P_xx+ P_yy= M

5x+0=20

x=20/5 =4 units

(iii) If quantity consumed of Good X =0,

Budget equation becomes : zero + P_yY = M

or=>5Y=20=Y=20/5=4 units

(iv) slope of budget line Px/Py=4/5=0.8

Individual demand schedule is a table showing various quantities of a commodity which a consumer is ready to buy at different possible prices of the commodity at a point of time. Market demand schedule is a schedule showing various quantities of a commodity which all the buyers in the market are ready to buy at different possible prices of the commodity at a point of time.

When price of the commodity increases, demand for the commodity contracts.

Consumer purchases up to the point where MU= Price. So long as MU > P, he keeps on purchasing. As he makes purchases, MU falls and at a particular quantity of the good MU becomes equal to price. Consumer purchases up to this point.

Detailed Answer:

Given price of a good, consumer Purchases that much of the commodity where rupee worth of additional satisfaction (MU_x/P_x) from the consumption of a unit more of a good is equal to the marginal utility of Money (MU_m) for the consumer. So that, in a state of equilibrium: (MU_x/P_x)= MU_m.

Budget Line is the locus of points that show such combinations of two goods that the consumer can buy with his given income and at given prices.

Budget line depends upon an income of the consumer and the prices of the two goods. If prices of the two goods remain unchanged, then with an increase in income, budget line of the consumer shifts to the right. Similarly, when there is fall in the prices of both the goods X and y and if the income of the consumer remains unchanged, then also the budget line will shift to the right.

Budget set refers to the set of possible combination of the two goods the consumer consume which he can afford from his income and given price, whereas budget line is the graphical presentation of the whole collection of the combination of the two goods which costs the consumer exactly his income.

Budget line shifts when any one or more of its determinants that is income and price of the two goods changes.

Detailed Answer: 

Budget Set 

Budget set refers to the attainable combinations of a set of two goods, given prices of the goods and income of the consumer. 

A budget set is based on the assumptions that income of the consumer and the prices of two goods (consumed by the consumer) remain unchanged. Accordingly, a change, either in prices or in consumer's income will lead to a change in the budget set.

Budget Line 

A budget line is the line that shows the maximum amount of good-X or of good-Y (or the possible combinations of X and Y) that the consumer can buy, given his money income and the prices of the goods X and Y. It is also called Price Line, as it shows the price ratio between good-X and Good-Y, or the rate at which one good can be exchanged for the other, given prices of the two goods in the market. Position of the budget line depends on the income of the consumer and prices of the two goods. If prices of two goods remain unchanged, then with an increase in income, budget line of the consumer shifts to the right. Similarly, if income of the consumer remains unchanged, the budget line will shift to the right when there is a proportionate fall in the prices of both goods X and Y. Thus, if the prices of both X and Y are reduced to half, the budget line will shift to the right showing twice the possible purchase of X and Y than before.

Yes. Shift in demand curve occurs due to change in factors other than own price of the commodity such as change in income of the consumer, tastes or preferences.

Demand curve is a graphic presentation of demand schedule, showing inverse relationship between price and quantity demanded of a commodity.

Law of demand fails in situations of (i) articles of distinction, (ii) ignorance of the buyer and  (iii) giffen goods.

Convexity of IC to the origin shows diminishing marginal rate of substitution.

(i) Ascending order: -0.3, -0.7, -0.8, -1.1 (minus sign only represents the inverse relation between price and quantity demanded)

(ii) 

Conclusion: The given data shows an inverse relation between Px and total outly, thus as per the total expenditure method, Ed > 1.

Yes. Elasticity of demand is high in case of goods with close substitutes. Because availability of close substitutes makes it possible for the consumer to switch from one commodity to the other in response to change in the relative price structure.

False

It is a situation of zero price elasticity of demand. Because, when expenditure on the commodity is increasing proportionate to increase in price, total purchase of the commodity remains constant. Constant purchase means zero elasticity of demand.

(i) No. of firms. 

(ii) Possibility of expected change in price 

(iii) Taxes and subsidies. 

(iv) Change in technology 

(v) Input price changes 

(vi) Agreement among producers.

Variable Factors are those factors which vary to change the level of output. The costs of such factors vary with level of output. 

E.g. labour, raw material etc. 

Yes. Demand for a commodity refers to the entire demand schedule showing various quantities of the commodity that the buyers in the market are ready to buy at different possible prices at a point of time.

No. Demand for a commodity is always expressed with reference to price.

Budget equation is given as :

P_xX+P_yY=M

Let Good-1 be X

and Good-2 be Y

Putting the values, we get :

(6).(6) + (8).(8) = 36 + 64= Rs.100

No. When E_d = 0, demand remains constant, no matter what the price is. Implying that total expenditure may increase/decrease, but not the quantity demanded.

Elasticity of demand (with respect to price of the commodity) shows percentage change in quantity demanded due to percentage change in price of the commodity.

Movement along the demand curve occurs when quantity demanded is related to changes in price of the commodity. 

Shift in demand curve occurs when demand for a commodity is related to factors other than price of the commodity.

No. Price elasticity of demand along a straight line demand curve is different at different points on the demand curve. Because, at a particular point on the demand curve, (E_d =  lower segment/upper segment,) which tends to change from point to point.

True

Because increase in price is not causing any change in expenditure on the commodity. This is in accordance with expenditure method of measuring elasticity.

Marginal utility is the utility derived from an additional unit of a commodity. 

Total utility is the sum total of marginal utilities from the consumption of different units of a commodity.

Factors inputs are classified as 

(i) Fixed factors and 

(ii) variable factors.

Yes. Because demand refers to various quantities of a commodity that the consumer is ready to buy against different possible prices.

According to the utility analysis, the consumer is in equilibrium when:

MU_x/P_x=MU_y/P_y=M_um

Now, given that P_x falls,then

MU_x/P_x> MU_y/P_y

Since per rupee MU_x is higher than per rupee MU_y the consumer will buy more units of X commodity and less of Y commodity.

Elasticity of demand shows the degree of responsiveness of demand to change in the price of a commodity.

In some cases the demand curve slopes upwards. 

(i) Giffen goods. Inferior goods have large negative income effect. 

(ii) Demand increases when prestige is attached to the possession of a good,