A consumer is a rational individual who knows what is good and bad for him/her. So, he always tries to achieve the best to get maximum satisfaction. Thus, the consumer chooses the set of bundles as per his preference which is best for him. The consumer always prefers to move to a point on the highest possible indifference curve given on the budget set. The slope of the budget line is the rate at which the consumer is able to substitute one good for the other in the market.
A rational consumer is one who has:
Monotonic preference
The correct answer is Monotonic preference.
A **rational consumer** prefers more of a good rather than less, assuming that more consumption leads to higher satisfaction (utility).
- **Monotonic preference** means that a consumer always prefers a higher quantity of a good over a lower quantity.
- **(a) Many sets of bundles** is incorrect because the rational consumer selects the best bundle.
- **(c) High budget** is not a defining characteristic of rationality.
- **(d) Not ready to substitute goods** contradicts the principle of consumer choice.
Important Questions from Consumer’s Equilibrium
Match List-I with List-II:
List-I List-II (A) God's own country (I) Karnataka (B) Information Technology Industry (II) Punjab (C) Industrially advanced (III) Kerala (D) Agriculturally affluent (IV) Gujarat Choose the correct answer from the options given below:
According to Keynesian theory, the equilibrium level of income is achieved when:
Two commodities are perfect substitutes for the consumer and the indifference curve will be:
Suppose a consumer can afford to buy 8 units of good X and 10 units of good Y. She spends her entire income. The prices of two goods are ₹7 and ₹9 respectively. The consumer’s income is ₹______.
The indifference curve is:
