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Standard XII
Economics
Question

The consumer is in equilibrium when __________.

  1. the price line is tangent to the indifference curve
  2. the price line is parallel to the indifference curve
  3. the price line cuts the indifference curve
  4. two indifference curves cut each other

A
the price line is parallel to the indifference curve
B
the price line is tangent to the indifference curve
C
the price line cuts the indifference curve
D
two indifference curves cut each other
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Solution
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Consumer achieves equilibrium at that point where the price line is tangent to the indifference curve.
In this case, the point where the price line is tangent to the indifference curve represents the minimum cost that the consumer will have to incur in order to obtain a certain level of utility given by the indifference curve.

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Similar Questions
Q1
A consumer is in equilibrium at the point of tangency of his indifference curve and the price line because ___________.
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Q2
How many indifference curves can touch the price line?
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Q3
Match the following:
A.Various combinations of two commodities that a consumer can purchase1. Indifference map
B.Various combinations of two commodities that give consumer equal satisfaction2.Indifference curve
C. A set of indifference curves3.Budget line
D.Point of agency of a budget line and an indifference curve4.Consumer's equilibrium

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Q4

a) A consumer, Mr Aman is in state of equilibrium consuming two goods X and Y, with given prices Px and Py . What will happen if MUxPx>MUyPy ?

b) Identify which of the following is not true for the Indifference Curves theory. Give valid reasons for choice of your answer:

a. Lower indifference curve represents lower level of satisfaction.
b. Two indifference curves can intersect each other.
c. Indifference curve must be convex to origin at the point of tangency with the budget line at the consumer’s equilibrium.
d. Indifference curves are drawn under the ordinal approach to consumer equilibrium.

OR

A consumer has total money income of Rs 500 to be spent on two goods X and Y with prices of Rs 50 and Rs 10 per unit respectively. On the basis of the given information, answer the following questions:
a. Give the equation of the budget line for the consumer.
b. What is the value of slope of the budget line?
c. How many units can the consumer buy if he is to spend all his money income on good X?
d. How does the budget line change if there is a 50% fall in price of good Y?

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Q5
Given the budget line a consumer will try to opt for _______ level of indifference curve.
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