Question

Assertion: Demand curve slopes negatively.

Reason: Law of demand is based on the assumption that money income remains unchanged despite the change in price of a commodity.

Options

• Both Assertion and Reason are true and Reason is the correct explanation of Assertion.

• Both Assertion and Reason are true but Reason is not the correct explanation of Assertion.

• Assertion is true and Reason is false.

• Both Assertion and Reason are false.

Answer 1

Both Assertion and Reason are true but Reason is not the correct explanation of Assertion.

Explanation:

The demand curve does slope downwards (price and quantity demanded are inversely related). The law of demand is stated under ceteris paribus (which includes keeping money income unchanged), so the Reason is true. However, the negative slope is explained by diminishing marginal utility together with the income and substitution effects when price changes, not merely by holding money income constant.