Match the items of the List - I with those of the List - II and indicate the correct code : Codes : (a) (b) (c) (d)List - I List - II (a) Convexity of the indifferences curve to origin (i) Indifference curve analysis (b) Quantity of certain goods sacrificed for a large quantity of other goods (ii) Consumer’s equilibrium (c) Equality of the ratio of the marginal utilities with that of the prices of the two goods (iii) Substitutability/complementarity of the two goods (d) Separation of substitution and income effects from the total price effect (iv) Marginal rate substitution
(iii) (iv) (ii) (i)
(a) Convexity of an indifference curve to the origin reflects how the two goods substitute for each other: a convex curve shows imperfect substitutes, a straight line perfect substitutes and an L-shape perfect complements. So (a) matches (iii) Substitutability/complementarity of the two goods.
(b) The quantity of one good the consumer gives up to get more of another while staying equally satisfied is the marginal rate of substitution. So (b) matches (iv) Marginal rate substitution.
(c) The consumer is in equilibrium when the ratio of marginal utilities equals the ratio of prices, \(\frac{MU_X}{MU_Y} = \frac{P_X}{P_Y}\), i.e. MRS equals the price ratio. So (c) matches (ii) Consumer’s equilibrium.
(d) Splitting the price effect into a substitution effect and an income effect is a contribution of the Hicksian indifference curve analysis. So (d) matches (i) Indifference curve analysis.
The matching is (a)-(iii), (b)-(iv), (c)-(ii), (d)-(i).
Hence, the answer is (iii) (iv) (ii) (i).
Similar Questions
When a consumer increases units of X - commodity by giving up some units of Y- commodity and even to attain the same level of satisfaction, the marginal rate of substitution, will be calculated by :
Important Questions from Indifference curve analysis
In the case of two production-inputs. which one of the following is not a property of Isoquants (the production indifference curves)?
Indifference curve theory states that:
What is constant along an indifference curve?
(1) Level of Utility
(2) Level of Output
(3) Level of Price- Which one of the following is not the basic property of indifference curves ?
- An indifference curve measures ____________ level of satisfaction derived from different combinations of commodity X and Y.
