Question : Assertion: A consumer's demand curve for normal good slopes downward.
Reason: As the price of a normal good decreases, the consumer can afford to buy more of it, leading to an increase in the quantity demanded.
Option 1: Both the assertion and reason are true, and the reason is a correct explanation of the assertion.
Option 2: Both the assertion and reason are true, but the reason is not a correct explanation of the assertion.
Option 3: The assertion is true, but the reason is false.
Option 4: The assertion is false, but the reason is true.
Correct Answer: Both the assertion and reason are true, and the reason is a correct explanation of the assertion.
Solution : The correct answer is (a) Option A Both the assertion and reason are true, and the reason is a correct explanation of the assertion.
The demand curve for a normal good slopes downward because of the income effect and the substitution effect. When the price of a normal good decreases, consumers can afford to buy more of it with their given income, leading to an increase in the quantity demanded. This is the income effect at work. Additionally, the substitution effect occurs when the price of a good decreases, making it relatively cheaper compared to other goods. This prompts consumers to switch from more expensive alternatives to the now relatively cheaper good, further increasing the quantity demanded. The combination of these effects results in a downward-sloping demand curve for normal goods.
Question : Assertion: A consumer's demand curve for a complement good slopes downward.
Reason: As the price of a complementary good decrease, the consumer is more likely to buy both goods together, leading to an increase in the quantity demanded.
Question : Assertion: A consumer's demand curve for a substitute good slopes upward.
Reason: As the price of a substitute good decreases, the consumer switches from the more expensive good to the cheaper substitute, leading to an increase in the quantity demanded.
Question : Assertion: A consumer's Engel curve for a normal good is upward-sloping.
Reason: As the consumer's income increases, their demand for a normal good also increases.
Question : Assertion: The Engel curve represents the relationship between the quantity demanded of a good and the consumer's income.
Reason: Engel curves can be used to distinguish between normal goods, inferior goods, and luxury goods.
Question : Assertion: Consumer equilibrium occurs when the consumer's budget line is tangent to the highest possible indifference curve.
Reason: At this point, the consumer is maximizing their utility within the given budget constraint.
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