NCERT Class 12 Economics Introductory Microeconomics: Chapter 2 — Theory of Consumer Behaviour
This chapter from NCERT Class 12 Economics, 'Introductory Microeconomics', delves into the Theory of Consumer Behaviour. It explains how an individual consumer makes choices about spending their income on various goods to achieve maximum satisfaction. The chapter introduces two key approaches: Cardinal Utility Analysis and Ordinal Utility Analysis. It defines utility as want-satisfying capacity and discusses its subjective nature, varying with individual preferences, place, and time. Preliminary notations like consumption bundles (x1, x2) are explained. Cardinal utility analysis is detailed, introducing Total Utility (TU) and Marginal Utility (MU), with MU defined as the change in TU from consuming one additional unit. The chapter highlights the law of diminishing marginal utility, where satisfaction decreases with increased consumption. This foundational understanding is crucial for students studying microeconomics and preparing for CBSE exams.
Quick info
| Board | CBSE / NCERT |
|---|---|
| Class | Class 12 |
| Subject | Economics |
| Book | Introductory Microeconomics |
| Chapter | Chapter 2 — Theory of Consumer Behaviour |
| Language | English |
| PDF type | NCERT Textbook |
| Session | CBSE 2026 |
| Reading time | 5 minutes |
| Word count | 910 |
Learning outcomes
- Understand the concept of consumer choice and utility.
- Differentiate between Cardinal and Ordinal Utility Analysis.
- Define and calculate Total Utility (TU) and Marginal Utility (MU).
- Explain the law of diminishing marginal utility.
- Analyze consumer behaviour based on preferences and affordability.
Vocabulary
| Word | Meaning |
|---|---|
| Utility | Want-satisfying capacity of a commodity. |
| Consumption bundle | A combination of quantities of different goods. |
| Cardinal Utility | Utility that can be expressed in numerical terms. |
| Ordinal Utility | Utility that can be ranked but not measured numerically. |
| Total Utility (TU) | Total satisfaction derived from consuming a given amount of a commodity. |
| Marginal Utility (MU) | The additional satisfaction gained from consuming one more unit of a commodity. |
| Diminishing Marginal Utility | The decrease in additional satisfaction with each additional unit consumed. |
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Practice questions
- What is meant by the utility of a commodity? Answer: Utility is the want-satisfying capacity of a commodity.
- Define Marginal Utility (MU). Answer: Marginal Utility is the change in total utility due to the consumption of one additional unit of a commodity.
- What does the law of diminishing marginal utility state? Answer: It states that as a consumer consumes more and more units of a commodity, the marginal utility derived from each successive unit decreases.
- Give an example of a consumption bundle. Answer: A consumption bundle could be (5 bananas, 10 mangoes), meaning 5 units of bananas and 10 units of mangoes.
Practice MCQs
Q1. Which of the following is NOT a characteristic of utility?
Explanation: Cardinal utility analysis assumes utility can be measured numerically, but utility itself is subjective and can vary.
Q2. If 3 units of a commodity give a total utility of 22 units and 4 units give a total utility of 24 units, what is the marginal utility of the 4th unit?
Explanation: Marginal Utility (MU) is calculated as TU(n) - TU(n-1). So, MU of 4th unit = TU(4) - TU(3) = 24 - 22 = 2 units.
Q3. The problem of choice for a consumer arises due to:
Explanation: Consumers face the problem of choice because they have unlimited desires but limited resources (income) to satisfy them.
Q4. Which approach assumes that utility can be ranked but not measured numerically?
Explanation: Ordinal Utility Analysis focuses on ranking preferences rather than assigning specific numerical values to utility.
Q5. According to the text, what is the primary goal of a consumer?
Explanation: The text states that any consumer will want to get a combination of goods that gives her maximum satisfaction.
Frequently asked questions
What is the core concept of the Theory of Consumer Behaviour?
It studies how an individual consumer decides how to spend their income on different goods to achieve maximum satisfaction, considering their preferences and affordability.
What are the two main approaches to studying consumer behaviour discussed in this chapter?
The chapter presents Cardinal Utility Analysis and Ordinal Utility Analysis.
How is utility defined in economics?
Utility is defined as the want-satisfying capacity of a commodity.
What is the difference between Total Utility and Marginal Utility?
Total Utility is the total satisfaction from consuming a given amount of a commodity, while Marginal Utility is the additional satisfaction from consuming one more unit.
What does the law of diminishing marginal utility imply?
It implies that as a consumer consumes more of a commodity, the additional satisfaction (marginal utility) derived from each extra unit tends to decrease.
Why is utility considered subjective?
Utility is subjective because different individuals can derive different levels of satisfaction from the same commodity, and it can also vary with place and time.
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NCERT Class 12 Economics — Introductory Microeconomics — Chapter 2 — Theory of Consumer Behaviour. Verified by NCERT Help Editorial Team. Reviewed on 29 Jul 2026. Last updated 10 Aug 2026.