Identify the correct statements from the following in respect to the demand of a commodity.
A. The demand function is a relation between the amount of the good and its price when other things remain same.
B. The slope of the demand curve measures the rate at which demand changes with respect to its price.
C. If the substitution effect is stronger than the income effect, then demand and price of good will have positive relation.
D. The market demand curve of a good can also be derived by adding individual demand curves vertically.
Choose the correct answer from the options given below:
Identify the correct statements from the following in respect to the demand of a commodity.
A. The demand function is a relation between the amount of the good and its price when other things remain same.
B. The slope of the demand curve measures the rate at which demand changes with respect to its price.
C. If the substitution effect is stronger than the income effect, then demand and price of good will have positive relation.
D. The market demand curve of a good can also be derived by adding individual demand curves vertically.
Choose the correct answer from the options given below:
Solution
A is correct: the demand function relates quantity demanded to price, other things constant. B is correct: the slope of the demand curve measures how demand changes with price. C is wrong: a positive price-demand relation (Giffen case) needs the income effect of an inferior good to outweigh the substitution effect. D is wrong: market demand is obtained by adding individual demand curves horizontally, not vertically. Hence A and B only.
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