﻿ Explain the three properties of the indifference curves. from C

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## CBSE Class 12 Economics Solved Question Paper 2014

11.

Why are the firms said to be interdependent in an oligopoly market? Explain.

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12.

A consumer consumes only two goods. Explain consumer's equilibrium with the help of utility analysis.

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13.

What happens to the demand of a good when consumer's income changes? Explain.

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14.

State the behaviour of marginal product in the law of variable proportions. Explain the causes of this behaviour.

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15.

Explain the conditions of consumer's equilibrium with the help of the indifference curve analysis.

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# 16.Explain the three properties of the indifference curves.

1) Indifference curves slope downward to the right:
This property implies that an indifference curve has a negative slope If the preferences are monotonic, an increase in the amount of good: 1. along the indifference curve is associated with a decrease in the amount of good 2. This implies that the slope of the indifference curve is negative. Thus, monotonicity of preferences implies that the indifference curves are downward sloping to the right.
2) Indifference curves are convex to the origin:
Another important property of indifference curves is that they are usually convex to the origin.

In other words, the indifference curve is relatively flatter in its right hand portion and relatively steeper in its left-hand portion. This is because as the consumers consume more and more of one good, the marginal utility good fall. In other words, the consumer is willing to sacrifice less and less for each additional unit of the other good consumed. Thus, as we move down the IC, MRS diminishes. This suggests the convex shape of indifference curve.
3) Slope of IC: The Slope of an IC is given by the Marginal Rate of Substitution (MRS). Marginal rate of substitution refers to the rate at which a consumer is willing to substitute one good for each additional unit of the other good.

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17.

From the following information about a firm, find the firms equilibrium output in terms of marginal cost and marginal revenue. Give reasons. Also find profit at this output.

 Output (units) Total Revenue (Rs.) Total Cost (Rs.) 1 7 8 2 14 15 3 21 21 4 28 28 5 35 36
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18.

Market of a commodity is in equilibrium. Demand for the commodity 'increases'. Explain the chain of effects of this change till the market again reaches equilibrium. Use diagram.

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19.

What are demand deposits?

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20.

What is involuntary unemployment?

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