Match List-I with List-II

Choose the correct answer from the options given below:

(A)-(IV), (B)-(I), (C)-(II), (D)-(III)

The correct answer is Option (1) → (A)-(IV), (B)-(I), (C)-(II), (D)-(III)

(A) Consumer's equilibrium: ➡ This is the point where a consumer maximizes their utility given their budget constraint. It represents the optimum choice of the consumer. Match: (IV)

(B) Slope of IC ➡ The slope of an Indifference Curve (IC) represents the rate at which a consumer is willing to substitute one good for another while maintaining the same level of utility. This is known as the Marginal Rate of Substitution of X for Y (MRSxy). Mathematically, it is represented as the change in Y divided by the change in X, or ΔY/ΔX. Therefore, (B) matches with (I) - ΔY/ΔX.

(C) Px falls: If the price of good X (Px) falls, while the price of good Y (Py) and the consumer's income remain constant, the consumer can now purchase more of good X with the same income. This causes the budget line to pivot outwards from the Y-intercept (which remains unchanged as Py is constant) and rotate to the right along the X-axis. The description "Budget line rotates to the right starting from the Y axis" accurately describes this. Therefore, (C) matches with (II) - Budget line rotates to the right starting from the Y axis.

(D) MRSxy > Px/Py: This condition indicates that the consumer is willing to give up more of good Y for an additional unit of good X than the market requires (the price ratio). In this situation, the consumer is not yet at equilibrium and can increase their total utility by consuming more of good X and less of good Y. To do this, the consumer should move downwards to the right along the IC to reach a point where MRSxy equals Px/Py. Therefore, (D) matches with (III) - Consumer should move downwards to the right along the IC.