Match List-I with List-II:
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List-I |
List-II |
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(A) Consumer equilibrium |
(I) MRS Ratio of prices |
|
(B) Necessity goods |
(II) Unit elastic demand |
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(C) Total expenditure decreases with increase in price of the good |
(III) Inelastic demand |
|
(D) Rectangular hyperbola demand curve |
(IV) Elastic demand |
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → (A)-(I), (B)-(III), (C)-(IV), (D)-(II)
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Consumer equilibrium (A): This occurs when the Marginal Rate of Substitution (MRS) equals the ratio of prices. Thus, (A) matches with (I).
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Necessity goods (B): These are generally considered to have inelastic demand because consumers will buy them regardless of price changes. Therefore, (B) matches with (III).
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Total expenditure decreases with an increase in the price of the good (C): This condition indicates elastic demand. When demand is elastic, an increase in price leads to a decrease in total expenditure. Thus, (C) matches with (IV).
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Rectangular hyperbola demand curve (D): This is representative of unit elastic demand. A rectangular hyperbola indicates that total revenue remains constant when prices and quantities change. Therefore, (D) matches with (II).