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.
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 option is (a) Option A Both the assertion and reason are true, and the reason is a correct explanation of the assertion.
The assertion states that a consumer's Engel curve for a normal good is upward-sloping. This means that as the consumer's income increases, their demand for the normal good also increases. This is because a normal good is one for which demand increases as income increases.
The reason provided states that as the consumer's income increases, their demand for a normal good also increases. This is a correct explanation of the upward-sloping nature of the Engel curve for normal goods. As the consumer's income rises, they have more purchasing power, which allows them to afford more of the normal good and thus increases their demand for it.
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: The consumer's demand for a luxury good is income elastic.
Reason: As the consumer's income increases, their demand for luxury goods increases at a proportionately higher rate.
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.
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: 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.
Regular exam updates, QnA, Predictors, College Applications & E-books now on your Mobile