Theory of Consumer Behaviour Quiz - ICSE Class 12 Economics

Free practice quiz: Theory of Consumer Behaviour (ICSE Class 12 Economics). 49 multiple-choice questions with answers and explanations. Play online, no sign-up needed.

Sample questions

1. The Law of Diminishing Marginal Utility states that as a consumer consumes more units of a commodity, the additional utility derived from each successive unit will:

   1. Increase at an increasing rate
   2. Increase at a diminishing rate
   3. Remain constant
   4. Decrease at an increasing rate
   Show answer

   Answer: B. Increase at a diminishing rate

   The Law of Diminishing Marginal Utility posits that beyond a certain point, the extra satisfaction a consumer gets from consuming an additional unit of a good or service decreases with each new unit, even if the total utility increases.

2. The concept of 'consumer surplus' is best described as:

   1. The total expenditure by the consumer on a good.
   2. The difference between the price a consumer is willing to pay for a good and the price they actually pay.
   3. The additional utility gained from consuming one more unit of a good.
   4. The amount of money a consumer saves by buying in bulk.
   Show answer

   Answer: B. The difference between the price a consumer is willing to pay for a good and the price they actually pay.

   Consumer surplus represents the economic benefit a consumer derives from purchasing a good or service. It is the difference between the maximum price a consumer is willing to pay (their valuation) and the actual market price they pay.

3. Consider a budget line represented by the equation 20X + 10Y = 200. If the price of X is Rs. 20 and the price of Y is Rs. 10, what is the consumer's income?

   1. Rs. 100
   2. Rs. 200
   3. Rs. 20
   4. Rs. 10
   Show answer

   Answer: B. Rs. 200

   The equation of a budget line is Px*X + Py*Y = Income. Given Px = 20 and Py = 10, the equation is 20X + 10Y = Income. The provided equation is 20X + 10Y = 200. Therefore, the consumer's income is Rs. 200.

4. If the income elasticity of demand for a good is positive, it is a(n):

   1. Inferior good
   2. Normal good
   3. Giffen good
   4. Luxury good
   Show answer

   Answer: B. Normal good

   Income elasticity of demand measures the responsiveness of demand to changes in income. A positive income elasticity indicates that as income increases, demand for the good also increases, which is characteristic of normal goods.

5. The 'law of demand' is generally represented by a demand curve that is:

   1. Upward sloping
   2. Downward sloping
   3. Horizontal
   4. Vertical
   Show answer

   Answer: B. Downward sloping

   The law of demand states that, ceteris paribus, as the price of a good increases, the quantity demanded decreases, and vice versa. This inverse relationship is depicted by a downward-sloping demand curve.

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