Posted on: 12:14 Wed, 19 Jun 2019



WELCOME TO JFT JUPEB 2019 ECONOMICS ANSWERS
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ECONOMICS ESSAY ANSWER:-
(2a) Indifference Curve
It is a curve that shows the combination of goods which gives the same level of satisfaction to the consumers so that an individual is indifferent. In other words, the consumer gives equal preference to all such combinations.

It is a graph that gives a consumer equal satisfaction, making the consumer indifferent. An indifference curve shows the combination of services which a consumer can prefer over the other.

For any consumer, utility function (U) is a function of the quantities of goods. Suppose there are two commodities x1 and x2. Then

U = f (x1, x2) = constant = U0.

On the indifference curve, the quality consumed of one commodity is compensated by the increase in the quantity consumed of the other commodity.

marginal rate of substitution



Assumption
Utility is cardinal.
Consumer is rational.
Goods consumed are substitutable.
Availability of more goods is always better.
A consumer will have transitivity in his choice. Suppose a consumer prefer item ‘A’ over ‘B’. Also, he chooses item ‘B’ over ‘C’. Then it must prefer item ‘A’ over ‘C’.
Properties of Indifference Curve
The difference curve has a negative slope.
Indifferent curves do not intersect.
They are convex from below, i.e., convex to the origin.
An indifference curve that lies to the right of another, yields more utility.
Marginal Rate of substitution
It is the rate at which the consumer is willing to give up commodity ‘X’ for one more unit of commodity ‘Y’. He tries to maintain the same level of satisfaction.

In simple words, it is the same as the utility gained for good Y as the utility lost for good X. One can calculate the marginal rate of substitution as

M.R.S. Y X = Δ X / Δ Y, on any point on the indifference curve.

Derivation of Formula Marginal Rate of Substitution
For any consumer, utility function (U) is a function of the quantities of goods. Suppose there are two commodities x1 and x2. Then

U = f (x1, x2) = constant = U0.

Taking total differential, we get

d U = ∂ f / ∂ x1 . d x1 + ∂ f / ∂ x2 . d x2 = d U0 = 0

⇒ f x1 d x1 + f x2 d x2

⇒ − d x2 / d x1 = f x1 / f x2 = (∂ U / ∂ x1 ) ÷ (∂ U / ∂ x2) = MU x1 / MU x2

The slope (d x2 / d x1) of the tangent at any point on an indifference curve is the rate at which x1 must be substituted for x2 or vice versa.

The negative of the slope (− d x2 / d x1) is the marginal rate of substitution of x1 for x2.



(source – econ 150)

Assumptions
The consumer is logical and knowledgeable to consume every unit of goods.
Goods are equal in size and shape.
No time gap between consumption.
No change in income, preference, taste, and fashion.
Utility is cardinal.
Marginal unit of money is constant.
Limitations
This law doesn’t apply to

Dissimilar units.
Unreasonable quantity.
Unsuitable time period.
Rare collections like coins, stamps etc.
Change in taste and fashion of the consumer.
Abnormal person.
Changing the income of the consumer.
Habitual goods.
Durable and valuable goods.

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(5a) The "Demographic Transition" is a model that describes population change over time. By "model" we mean that it is an idealized, composite picture of population change in these countries. The model is a generalization that applies to these countries as a group and may not accurately describe all individual cases.

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6a) I) Overuse of Resources:
Rapid population growth tends to overuse the country’s natural resources. This is particularly the case where the majority of people are dependent on agriculture for their livelihood. With rapidly rising population, agricultural holdings become smaller and unremunerative to cultivate.

ii)Urbanisation:
With rapidly growing population, it becomes difficult to manage the adjustments that accompany economic and social change. Urbanisation in UDCs creates such problems as housing, power, water, transport, etc. Besides, growing population threatens permanent environmental damage through urbanisation in some rural areas.

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