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Economics · Class 11 Commerce

Ch 2Consumption Analysis — Class 11 Economics, concept-first.

Consumption, in economics, means the direct use of goods and services to satisfy human wants — eating a meal, wearing a shirt, or riding a bus are all acts of consumption. Every act of consumption begins with a want, and economics classifies wants by how essential they are to the person feeling them.

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Law of Diminishing Marginal Utility

Law of Diminishing Marginal Utility

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CA Foundation

2 concepts · 2 appearances

2025

Chapter contents

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1

Meaning of Consumption and Classification of Wants

Consumption, in economics, means the direct use of goods and services to satisfy human wants — eating a meal, wearing a shirt, or riding a bus are all acts of consumption.

2

Cardinal Utility Approach — Total Utility and Marginal Utility

The Cardinal Utility Approach, associated with Alfred Marshall, assumes that the satisfaction a person gets from consuming a good — its utility — can be measured precisely in numerical units, called u…

3

Law of Diminishing Marginal Utility

The single most important law in the cardinal theory of consumption is the Law of Diminishing Marginal Utility (DMU): as a consumer consumes more and more successive units of a commodity, per unit of…

4

Law of Equi-Marginal Utility (Law of Substitution)

A consumer rarely spends income on just one good. The Law of Equi-Marginal Utility (also called the Law of Substitution, or the Law of Maximum Satisfaction) explains how a rational consumer with a FIX…

5

Consumer's Surplus

Consumer's Surplus, a concept developed by Alfred Marshall, measures the extra satisfaction a consumer enjoys because he is often willing to pay MORE for a good than what he actually has to pay in the…

6

Ordinal Utility Approach — Indifference Curves and the Marginal Rate of Substitution

The Cardinal Approach's assumption that satisfaction can be measured in precise numerical utils is unrealistic — no one can genuinely say that one cup of coffee gives "exactly 14 utils." The Ordinal U…

7

Budget Line (Price Line)

While an indifference map shows what combinations of two goods a consumer would EQUALLY LIKE to have, it says nothing about which of them he can actually afford — that depends on his income and the pr…

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Consumer's Equilibrium Under the Indifference Curve Approach

The two building blocks above — the indifference map (showing what the consumer would LIKE) and the budget line (showing what he can AFFORD) — combine to determine the consumer's actual equilibrium pu…

Exercises

+Show 9 questions9 questions
  1. Q6The Total Utility derived by a consumer from successive units of a snack is: 1st unit — 20, 2nd — 36, 3rd — 48, 4th — 56, 5th — 60, 6th — 60…Free
  2. Q7A consumer has Rs. 21 to spend on two goods X (Rs. 3 per unit) and Y (Rs. 4 per unit). His marginal utility schedules are given below. Using…Free
  3. Q8A consumer's willingness to pay for successive units of a good is Rs. 15, 12, 9, 6, and 3 for units 1 to 5 respectively. If the market price…Free
  4. Q9A consumer is indifferent between the following combinations of goods X and Y. Compute the Marginal Rate of Substitution between each succes…Preview
  5. Q10In the earlier example, a consumer had an income of Rs. 600 to spend on X (Rs. 60 per unit) and Y (Rs. 40 per unit). Suppose his income now…Preview
  6. Q11State the Law of Diminishing Marginal Utility. What are its main assumptions, and name two situations commonly cited as exceptions to it?Preview
  7. Q12Distinguish between the Cardinal and Ordinal approaches to utility analysis.Preview
  8. Q13State the main properties of Indifference Curves.Preview
  9. Q14Explain how a rational consumer attains equilibrium under the Indifference Curve approach.Preview

Sample & Board Papers

Sample papers and previous-year board questions for this subject.

+Show 27 questions27 questions
  1. Q1Marginal Utility is measured by using the formula of : (a) TUn + TUn+1 (b) TUn - TUn-1 (c) TUn - TUn+1 (d) TUn + TUn-1Preview
  2. Q2The indifference curves are : (a) negatively sloped (b) vertical (c) horizontal (d) positively slopedPreview
  3. Q3State the meaning of Indifference curves and Elasticity of demand.Preview
  4. Q4What are the important features of Utility ?Preview
  5. Q5Explain the theory of "Consumer's Surplus".Preview
  6. Q6(a) Explain the Law of Equi-Marginal Utility. OR (b) Explain the sectoral contribution of Tamil Nadu.Preview
  7. Q7Elasticity of demand is equal to one indicates : (a) Perfectly Inelastic Demand (b) Unitary Elastic Demand (c) Relatively Elastic Demand (d)…Preview
  8. Q8When marginal utility reaches zero, the total utility will be : (a) Zero (b) Minimum (c) Negative (d) MaximumPreview
  9. Q9Name the types of utility.Preview
  10. Q10Describe the features of Human wants.Preview
  11. Q11(a) Elucidate the Law of diminishing marginal utility with a diagram. OR (b) Describe the salient features of EXIM Policy (2015-2020).Preview
  12. Q12Given potential price is Rs. 250 and the actual price is Rs. 200. Find the Consumer Surplus. (a) 200 (b) 375 (c) 50 (d) 175Preview
  13. Q13What are Giffen Goods ? Why it is called like that ?Preview
  14. Q14Distinguish between extension and contraction of demand.Preview
  15. Q15When marginal utility reaches zero, the total utility will be : (a) Zero (b) Minimum (c) Negative (d) MaximumPreview
  16. Q16Write the classifications of Wants.Preview
  17. Q17What are the important features of Utility ?Preview
  18. Q18What are the properties of Indifference curve ?Preview
  19. Q19There is no close substitute to ______. (a) Sugar (b) Match box (c) Salt (d) TeaPreview
  20. Q20The basis for the Law of Demand is related to : (a) Law of Equi-marginal Utility (b) Law of Diminishing Marginal Utility (c) Gossen's Law (d…Preview
  21. Q21Increase in demand is caused by : (a) Increase in interest rate (b) Increase in tax (c) Decline in population (d) Higher SubsidyPreview
  22. Q22What are Giffen goods ? Why is it called so ?Preview
  23. Q23(a) Explain the Law of Demand and its exceptions. OR (b) How price and output are determined under Perfect Competition ?Preview
  24. Q24(a) Explain the Theory of Consumer's Surplus with diagram. OR (b) Explain any five Cost Concepts.Preview
  25. Q25The chief exponent of the Cardinal utility approach was (a) J.R.Hicks (b) R.G.D.Allen (c) Marshall (d) StiglerPreview
  26. Q26Increase in demand is caused by (a) Increase in tax (b) Higher subsidy (c) Increase in interest rate (d) decline in populationPreview
  27. Q27Distinguish between extension and contraction of demand.Preview

More questions

+Show 5 questions5 questions
  1. Example 1A consumer's Total Utility (TU) from successive cups of tea consumed at one sitting is given below. Derive the Marginal Utility (MU) schedul…Free
  2. Example 2A consumer has an income of Rs. 20 to spend on two goods X and Y, priced at Rs. 2 and Rs. 3 per unit respectively. His marginal utility sche…Free
  3. Example 3A consumer's willingness to pay (marginal valuation, in Rs.) for successive units of a good is given below. If the market price of the good…Preview
  4. Example 4A consumer is indifferent between the following combinations of goods X and Y — that is, all of them lie on the same indifference curve. Com…Preview
  5. Example 5A consumer has a monthly income of Rs. 600 to spend entirely on two goods X (price Rs. 60 per unit) and Y (price Rs. 40 per unit). Write the…Preview