Economics · Class 11 Commerce
Ch 2Theory of Consumption — Class 11 Economics, concept-first.
Consumption is the act of using goods and services to satisfy human wants. Every economic activity ultimately traces back to consumption, because production, exchange and distribution all exist to make consumption possible.
Key concepts
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Cardinal Utility and the Law of Diminishing Marginal Utility
The cardinal approach, developed by Alfred Marshall, assumes that a consumer's satisfaction can be measured numerically in imaginary units called utils.
Most relevant Q&A
- Distinguish between the cardinal and ordinal approaches to utility analysis.Free
- State the Law of Diminishing Marginal Utility. Explain its assumptions.Free
- The total utility derived by a consumer from successive units of a commodity is given below. Calculate marginal utility at each level and st…Free
- Choose the correct option: The Law of Diminishing Marginal Utility was first propounded by: (a) Alfred Marshall (b) J. R. Hicks (c) H. H. Go…Preview
- From the following data on a consumer's total utility derived from successive cups of tea, calculate the marginal utility of each cup and st…Free
In previous exams
How often this chapter’s concepts have been examined — real appearance data, never estimated.
Chapter contents
The NCERT structure, section by section. Open a section to see its questions, then read the concept-first solution.
Introduction to Consumption and Utility Analysis
Consumption is the act of using goods and services to satisfy human wants. Every economic activity ultimately traces back to consumption, because production, exchange and distribution all exist to mak…
Cardinal Utility Approach: Total and Marginal Utility
Alfred Marshall's cardinal approach treats utility as a measurable quantity, expressed in imaginary units called utils, in the same way that weight is measured in kilograms or length in metres.
Law of Diminishing Marginal Utility
The Law of Diminishing Marginal Utility (LDMU), also known as Gossen's First Law after the German economist Hermann Heinrich Gossen who first stated it, is one of the most fundamental laws of consumpt…
Law of Equi-Marginal Utility
A consumer rarely spends income on only one commodity; income has to be allocated across many goods. The Law of Equi-Marginal Utility, also called Gossen's Second Law or the Law of Substitution, expla…
Ordinal Utility Approach: Indifference Curves
Economists such as J. R. Hicks and R. G. D. Allen questioned whether satisfaction can really be measured in precise cardinal numbers, and developed the ordinal utility approach instead.
Marginal Rate of Substitution
Movement along a single indifference curve involves giving up some quantity of one good in exchange for more of the other, while keeping total satisfaction unchanged.
Budget Line and Consumer Equilibrium
An indifference map by itself only shows a consumer's preferences; it says nothing about what the consumer can actually afford.
Exercises
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- Q3Distinguish between the cardinal and ordinal approaches to utility analysis.Free
- Q4State the Law of Diminishing Marginal Utility. Explain its assumptions.Free
- Q5The total utility derived by a consumer from successive units of a commodity is given below. Calculate marginal utility at each level and st…Free
- Q6State the Law of Equi-Marginal Utility. Give its formula and explain the process by which a consumer reaches equilibrium under this law.Preview
- Q7A consumer buying two goods P and Q, priced Rs. 5 and Rs. 3 respectively, currently consumes a combination at which MU of P = 25 and MU of Q…Preview
- Q8What is an indifference curve? Explain any four properties of indifference curves.Preview
- Q9From the indifference schedule given below, calculate the Marginal Rate of Substitution of X for Y (MRSxy) between successive combinations a…Preview
- Q10What is a budget line? Write its equation and explain how it shifts when (a) income increases, prices remaining the same, and (b) the price…Preview
- Q11Explain the conditions for consumer equilibrium under the ordinal (indifference curve) approach, with the help of a diagram.Preview
- Q12A consumer's MRSxy at the current combination is 3, while Px = Rs. 6 and Py = Rs. 3. Is the consumer in equilibrium? If not, in which direct…Preview
- Q13Choose the correct option: The Law of Diminishing Marginal Utility was first propounded by: (a) Alfred Marshall (b) J. R. Hicks (c) H. H. Go…Preview
- Q14Choose the correct option: Indifference curves are: (a) Concave to the origin (b) Convex to the origin (c) Straight lines with a constant sl…Preview
Sample & Board Papers
Sample papers and previous-year board questions for this subject.
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- Q1Explain the consumer's equilibrium using indifference curve.Preview
- Q2Write about price line or budget line.Preview
- Q3Write a short note on: Ordinal utilityPreview
- Q4Define price line or budget line and explain shifts in budget line.Preview
- Q5Explain the properties of indifference curve.Preview
- Q6Write a short note on: Cardinal UtilityPreview
- Q7Explain the Law of Diminishing Marginal Utility and state its limitations.Preview
- Q8Explain the properties of indifference curve.Preview
- Q9Write a short note on: Price line / Budget linePreview
- Q10Explain the law of diminishing marginal utility and its limitations.Preview
- Q11Explain the properties of indifference curve.Preview
- Q12Write a short note on: Price Line/Budget LinePreview
More questions
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- Example 1From the following data on a consumer's total utility derived from successive cups of tea, calculate the marginal utility of each cup and st…Free
- Example 2A consumer has an income of Rs. 20 to spend on two goods, X (price Rs. 4 per unit) and Y (price Rs. 2 per unit). The marginal utility schedu…Preview