MCQ Chapter 2 Theory of Consumer Behaviour Class 12 Economics

MCQ Questions Class 12

Please refer to Theory of Consumer Behaviour MCQ Questions Class 12 Economics below. These MCQ questions for Class 12 Economics with answers have been designed as per the latest NCERT, CBSE books, and syllabus issued for the current academic year. These objective questions for Theory of Consumer Behaviour will help you to prepare for the exams and get more marks.

Theory of Consumer Behaviour MCQ Questions Class 12 Economics

Please see solved MCQ Questions for Theory of Consumer Behaviour in Class 12 Economics. All questions and answers have been prepared by expert faculty of standard 12 based on the latest examination guidelines.

MCQ Questions Class 12 Economics Theory of Consumer Behaviour

Question: Law of equi-marginal utility is also known as ……… .
(a) Law of consumption
(b) Second law of consumption
(c) Law of usefulness
(d) All of the above   

Answer

B

Question: The law of equi-marginal utility considers price of money as
(a) zero
(b) less than one
(c) more than one
(d) one   

Answer

D

Question: Law of equi-marginal utility is a law of 
(a) production of wealth
(b) consumption of wealth
(c) distribution of wealth
(c) exchange of wealth

Answer

B

Question: Law of equi-marginal utility was given by ……… .
(a) Prof. Alfred Marshall
(b) Prof. Gossen
(c) Prof. Adam Smith
(d) None of the above

Answer

B

Question: In two commodity equilibrium case, if MUM is equal to 2, which of the following situation it indicates?
(a) One util is equal to one unit of currency
(b) One util is equal to two units of currency
(c) Two utils are equal to one unit of currency
(d) None of the above 

Answer

C

Question: Demand curve slopes downward due to law of 
(a) diminishingmarginal utility
(b) variable proportion
(c) utility maximisation
(d) None of the above 

Answer

A

Question: A consumer is in equilibrium, how will a consumer behave if MUx / Px MUy / Py < ?
(a) Consumer will consume more of good X and less of good Y
(b) Consumer will consume more of good Y and less of good X
(c) Consumerwill consumemore of both goods
(d) Consumer will consume less of both goods

Answer

B

Question: Which of the following is the vertical intercept of budget line?
(a) M/Px
(b) M/Py
(c) Px /Py
(d) None of these 

Answer

B

Question: Ordinal utility approach was given by ……… .
(a) Prof. Alfred Marshall
(b) Prof. Hicks
(c) Prof. Samuelson
(d) Prof. Gossen 

Answer

B

Question: Given the budget line 2x + 5y = 100, what will be its slope?
(a) -5/2
(b) 5/2
(c) -2/5
(d) 2/5

Answer

C

Question: Which of the following statements are true about consumer’s equilibrium?
(a) It is the situation of rest
(b) There is only possible equilibrium at given point of time
(c) Consumer’s preferences continuously changes until it reaches equilibrium
(d) All of the above 

Answer

D

Question: Budget constraint is a narrower concept as compared to budget line.
Choose from the options below.
(a) True
(b) False
(c) Partially true
(d) Incomplete statement  

Answer

B

Question: If a consumer is in equilibrium consuming one commodity, how will he respond to a fall in price of the commodity?
(a) Decrease consumption of the commodity
(b) Increase consumption of the commodity
(c) Consumption will remain constant
(d) None of the above 

Answer

B

Question: At the point of equilibrium, a consumer always reaches to the maximum point of total utility curve.
Choose from the options below.
(a) True
(b) False
(c) Partially true
(d) Incomplete statement   

Answer

B

Question: ……… shows various combinations of two products that give same amount of satisfaction.
(a) ISO cost curve
(b) Indifference curve
(c) Marginal utility curve
(d) ISO quant 

Answer

B

Question: As per cardinal utility approach, there are ……… situations of consumer’s equilibrium.
(a) two
(b) three
(c) four
(d) N-number   

Answer

B

Question: As per ordinal approach, utility is ……… approach.
(a) qualitative
(b) quantitative
(c) Both (a) and (b)
(d) Neither (a) nor (b) 

Answer

A

Question: An indifference curve is always drawn for ……… commodities.
(a) one
(b) two
(c) three
(d) N-number 

Answer

B

Question: An ideal shape of indifference curve is always
(a) concave to the origin
(b) convex to the origin
(c) L-shaped
(d) a vertical straight line   

Answer

B

Question: A consumer’s total expenditure is restricted by
(a) budget constraint
(b) utility
(c) satisfaction
(d) All of these

Answer

A

Question: Indifference curve is convex to the origin due to
(a) increasing marginal rate of substitution
(b) diminishing marginal rate of substitution
(c) increasing marginal rate of substitution
(d) diminishing marginal rate of substitution 

Answer

B

Question: The slope of indifference curve is called as ……… .
(a) market rate of exchange
(b) marginal rate of transformation
(c) marginal rate of substitution
(d) All of the above

Answer

C

Question: MRSYX is equal to which of the following equation?
(a) Change in X / Change in Y
(b) Change in Y / Change in X
(c) PX/PY
(d) None of the above   

Answer

A

Question: Which of the following are the properties of indifference curve?
(i) Downward sloping
(ii) Convex to the origin
(iii) Higher ICrepresents higher satisfaction
(iv) Two IC cannot intersect each other
(v) IC cannot touch either axis
(vi) IC need not to be parallel
Choose from the options below.
(a) (i), (ii), (iii), (iv) and (vi)
(b) (i), (ii), (iii), (iv) and (v)
(c) (i), (iii), (iv) and (vi)
(d) (i), (ii), (iii), (iv), (v) and (vi) 

Answer

D

Question: Indifference curves between income and leisure for an individual are generally
(a) concave to the origin
(b) convex to the origin
(c) negatively sloped straight lines
(d) positively sloped straight lines

Answer

D

Question: Write the correct pair.

Column IColumn II
A. Cardinal approach(i) MUX/PX MUm
B. Ordinal approach(ii) TU MU1 MU2 = + … MUn
C. Budget set(iii) PXQY + PY QX M
D. Budget line(iv) PXQX+ PY QY=M

Codes
(a) A – (i)
(b) B – (ii)
(c) C – (iii)
(d) D – (iv)

Answer

D

Question: Intersection of two indifference curves gives same level of satisfaction.
Choose from the options below.
(a) True
(b) False
(c) Partially true
(d) Incomplete statement   

Answer

C

Question: How will a consumer behave if Marginal Rate of Substitution (MRS) > Marginal Rate of Exchange (MRE)?
(a) Consumemore of good X and less of good Y
(b) Consumemore of good Y and less of good X
(c) Consume more of good X and same units of good Y
(d) Consume more of good Y and same units of good X   

Answer

A

Question: Indifference curves are convex to the origin because
(a) two goods are perfect substitutes
(b) two goods are perfect complementary goods
(c) two goods are imperfect substitutes
(d) None of the above 

Answer

C

Question: An indifference curve which is drawn by taking economic bad commodity on both axis, will be
(a) convex to the origin
(b) concave to the origin
(c) L-shaped
(d) straight line   

Answer

B

Question: Indifference curve for complementary goods will be
(a) convex to the origin
(b) concave to the origin
(c) L-shaped
(d) straight line   

Answer

C

Question: What will be the impact of change in income on the budget line?
(a) Shifts to the right
(b) Shifts to the left
(c) Either (a) or (b)
(d) Neither (a) nor (b) 

Answer

C

Question: What will be the impact of rise in price of good Y on the budget line?
(a) Rotate inward from vertical axis
(b) Rotate outward from vertical axis
(c) Rotate inward from horizontal axis
(d) Rotate outward from horizontal axis 

Answer

A

Question: Budget line can change due to 
(a) change in income
(b) change in price of either good X or good Y
(c) change in price of both goods
(d) All of the above    

Answer

D

Question: A consumer is in equilibrium, how will a consumer behave if MRS XY < P X /PY ?
(a) Consumer will consume more of good X and less of good Y
(b) Consumer will consume more of good Y and less of good X
(c) Consumer will consume more of both goods
(d) Consumer will consume less of both goods 

Answer

B

Question: Choose the correct statement from below.
(a) At the point of equilibrium, consumer reaches the highest possible IC with given income
(b) At the equilibrium, not all the bundle lying on the IC are affordable
(c) IC which is beyond the budget line is not achievable
(d) All of the above are true 

Answer

D

Question: A set of indifference curve is known as 
(a) Indifference map
(b) Indifference chart
(c) Indifference curve
(d) None of these 

Answer

A

Question: What will be the impact of fall in price of good X on the slope of budget line?
(a) Rise
(b) Fall
(c) Remain constant
(d) Not defined   

Answer

B

Question: At equilibrium, the slope of the indifference curve is
(a) equal to the slope of budget line
(b) greater than the slope of budget line
(c) smaller than the slope of budget line
(d) None of the above   

Answer

A

Question: Write the correct sequence of options in column II by matching them with options of column I. 

Column IColumn II
A. Exceptions to law of diminishing marginal utility(i) Music
B. Prof. Gossen(ii) Indifference curve analysis
C. Prof. Allen and Hicks(iii) Law of diminishing marginal utility

Codes
A B C A B C
(a) (i) (ii) (iii) (b) (i) (iii) (ii)
(c) (iii) (ii) (i) (d) (ii) (iii) (i)

Answer

B

Question: For a consumer, MRS XY = 4 and P X = 40 and PY = 5. Which statement suits this situation?
(a) Consumer is in equilibrium
(b) Consumer will consume more of good X and less of good Y
(c) Consumer will consume more of good Y and less of good X
(d) None of the above 

Answer

C

Question: Under monotonically preferred bundle, a consumer gets more units of at least one commodity with no less units of other commodity or more units of both commodities.
Choose from the options below.
(a) True
(b) False
(c) Partially true
(d) Incomplete statement 

Answer

A

Question: Consumer’s equilibrium refers to the state where a consumer reaches maximum point of total utility.
Choose from the options below.
(a) True
(b) False
(c) Partially true
(d) Incomplete statement 

Answer

C

Question: At the point of equilibrium, the shape of indifference curve must be ……… .
(a) concave
(b) convex
(c) straight line
(d) Any of these   

Answer

B

Question: A consumer is in equilibrium consuming two goods when 
(a) marginal utilities of different goods are equal
(b) slope of MRS is equal to slope of budget line
(c) Both (a) and (b)
(d) None of (a) and (b)   

Answer

C

(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
(b) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A)
(c) Assertion (A) is true, but Reason (R) is false
(d) Assertion (A) is false, but Reason (R) is true

Question: Assertion (A) Different persons derive different levels of utility from consumption of similar types of commodities.
Reason (R) The want satisfying power of any commodity is known as its utility, which is measured in ‘utils’ under cardinal approach. 

Answer

B

Question: Assertion (A) Two indifference curves cannot intersect each other as different IC represents different levels of satisfactions.
Reason (R) Indifference curve for substitute goods is downward sloping straight line.

Answer

B

Question: Assertion (A) Consumer’s utility is the point of ‘Satiety’ where he attains maximum gain with given resources.
Reason (R) A rational consumer always prefers consumption of more units of goods as compared to less units. 

Answer

D

Question: Assertion (A) If a consumer consumes a good with time lag, than law of DMU does not holds true.
Reason (R) Human wants are unlimited, as soon as one want gets satisfied another want arises. 

Answer

A

Question: Assertion (A) Higher IC represents higher satisfaction due to monotonic preferences.
Reason (R) A consumer always prefers more units of a good over less units.

Answer

B

Case Study Based MCQ Questions Theory of Consumer Behaviour Class 12 Economics

Ravi has fallen on hard times due to lockdown.
His income per week is ` R.s 400, spending ` R.s 200 on food and `R.s 200 on all other goods. However, he is also receiving a social allowance in the form of ` R.s10 food stamps per week from government. The coupons can be exchanged for ` R.s10 worth of food, and he only has to pay ` R.s5 for such coupons.

Question: What will be the equation of budget line food and non-food items (with food coupons)?
(a) Price (food) + Price (non-food) = 210
(b) Price (food) + Price (non-food) = 410
(c) Price (food) + Price (non-food) < 410
(d) Price (food) + Price (non-food) = 405 

Answer

B

Question: If Ravi is to be at equilibrium point,what should be the condition?
(a) MRS = 2
(b) MRS= 4
(c) MUx / MUy = 2
(d) Can’t be determined 

Answer

D

Question: What will be the equation of budget line food and non-food items (without food coupons)?
(a) Price (food) + Price (non-food) = 200
(b) Price (food) + Price (non-food) = 400
(c) Price (food) + Price (non-food) < 400
(d) Price (food) + Price (non-food) > 400 

Answer

B

Question: Preferences are considered as monotonic when ………… .
(a) equal units of goods are more preferred
(b) less units of goods are more preferred
(c) more units of the goods are more preferred
(d) All of the above 

Answer

C

Question: Assertion (A) Ravi will be in a better situation after subsidies as compared to before subsidy situation.
Reason (R) Food subsidy or coupons has no impact on the equilibrium as the pandemic is a rare situation.
Alternatives
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
(b) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A)
(c) Assertion (A) is true, but Reason (R) is false
(d) Assertion (A) is false, but Reason (R) is true 

Answer

B

Direction Read the following case study and answer questions 76 to 80 on the basis of the same.
In economic terms, a consumer is an economic agent, who consumes a good or service for satisfaction of his/her wants.
Keeping in mind the said definition, every individual consumer is a rational consumer and understands his/her best interest.
However, on certain occassions, we can observe that people buys goods or services without their choice or needs, i.e. influenced by certain external factors/components. In such situations, utility is derived by mere purchase of goods and not from its consumption. Also, under such cases determining optimum level of consumption becomes difficult. One such example can be drawn from festive buying in India. 

Question: In the above case, utility should be considered as ………… in nature.
(a) qualitative
(b) quantitative
(c) Both (a) and (b)
(d) Neither (a) nor (b)

Answer

C

Question: Rationality of a consumer depends upon which of the following factors?
(a) Consumer’s taste and preferences
(b) Utility from consumption of a good
(c) Based upon the habit of a consumer
(d) All of the above   

Answer

C

Question: When a consumer buys goods without their need, consumer’s equilibrium becomes ………….. .
(a) static/constant
(b) dynamic
(c) unambiguous
(d) stable 80. Assertion (A) A consumer is an economic agent who maximises profits.   

Answer

C

Reason (R) At equilibrium point, utility from units of goods consumed can be negative as well.
Alternatives
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
(b) Both Assertion (A) and Reason (R) are true,but Reason (R) is not the correct explanation of Assertion (A)
(c) Assertion (A) is true, but Reason (R) is false
(d) Both are false 

Answer

D

Question: Which of the following statements is/are true for utility?
(a) Utility is thewant satisfying power of a commodity
(b) Utility depends upon want and choice
(c) Same good may give different utility in different situations
(d) All of the above 

Answer

D

Direction Read the following case study and answer questions 81 to 85 on the basis of the same.
We buy many goods and services to satisfy our wants. Using up of goods and services to satisfy wants is called consumption and the economic agent who buys goods and services is called a consumer. When a consumer buys any good or service, his/her main objective is to get maximum satisfaction from the quantity of the commodities purchased by spending his/her income at the given market price. The way a consumer maximises his/her satisfaction from spending his/her income on various goods and services is the subject matter of consumer’s behaviour.

Question: All goods that consumer consumes satisfy human wants.
Choose from the options below.
(a) True
(b) False
(c) Partially true
(d) Incomplete statement 

Answer

B

Question: As the income levels increases, the equilibrium condition ……… .
(a) remains unchanged
(b) changes
(c) unstable
(d) None of these   

Answer

B

Question: Assertion (A) When a consumer buys a good without the need, his equilibrium becomes unstable.
Reason (R) Price of the good and income of the consumer are the most important components of equilibrium.
Alternatives
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
(b) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A)
(c) Assertion (A) is true, but Reason (R) is false
(d) Assertion (A) is false, but Reason (R) is true 

Answer

B

Question: Consumer’s behaviour is the study of which of the following?
(a) Consumer’s equilibrium
(b) Demand
(c) Both (a) and (b)
(d) Neither (a) nor (b) 

Answer

C

Question: Which approach of utility gives more stable equilibrium condition?
(a) Cardinal
(b) Ordinal
(c) Both (a) and (b)
(d) Neither (a) nor (b) 

Answer

C

Direction Read the following case study and answer questions 86 to 90 on the basis of the same.
When consumers make choices about the quantity of goods and services to consume, it is presumed that their objective is to maximise total utility. In maximising total utility, the consumer faces a number of constraints, the most important of which are the consumer’s income and the prices of the goods and services that the consumer wishes to consume. The consumer’s effort to maximise total utility, subject to these constraints, is referred to as the consumer’s problem. The solution to the consumer’s problem, which entails decisions about how much the consumer will consume of a number of goods and services, is referred to as consumer equilibrium.
Consider the simple case of a consumer who cares about consuming only two goods: good 1 and good 2. This consumer knows the prices of goods 1 and 2 and has a fixed income or budget that can be used to purchase quantities of goods 1 and 2. The consumer will purchase quantities of goods 1 and 2 so as to completely exhaust the budget for such purchases. The actual quantities purchased of each good are determined by the condition for consumer equilibrium, which is 

Marginal utility of good 1/
Price of good 1
 = Marginal utility of good 2/ Price of good 2 
= …. = Marginal utility of good N/
                Price of good N

Question: Assertion (A) When consumers make choices about the quantity of goods and services to consume, it is presumed that their objective is to maximise total utility.
Reason (R) In maximising total utility,the consumer faces a number of constraints, the most important of which are the consumer’s income and the prices of the goods and services that the consumer wishes to consume.
Alternatives
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
(b) Both Assertion (A) and Reason (R) are true,but Reason (R) is not the correct explanation of Assertion (A)
(c) Assertion (A) is true, but Reason (R) is false
(d) Assertion (A) is false, but Reason (R) is true 

Answer

B

Question: Consumer should consume combination of both goods in a such way that it
(a) exhaust his entire income
(b) save a part of his income
(c) Either (a) or (b)
(d) None of these   

Answer

A

Question: The consumer’s effort to maximise total utility, subject to these constraints, is referred to as ……… .
(a) utility analysis
(b) consumer’s problem
(c) Both (a) and (b)
(d) None of these     

Answer

B

Question: The given law in case study is studied under which of the following approaches?
(a) Cardinal utility
(b) Ordinal utility
(c) Both (a) and (b)
(d) Neither (a) nor (b)   

Answer

A

Question: The above equation of equilibrium given in the case study is based upon…… .
(a) first psychological law of consumption
(b) second psychological law of consumption
(c) Both (a) and (b)
(d) Neither (a) nor (b)

Answer

B