Question : Assertion: The slope of the budget line represents the relative price of two goods in the consumer's consumption bundle.
Reason: The consumer chooses a consumption bundle where the marginal rate of substitution equals the relative price of the goods.
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 slope of the budget line represents the relative price of two goods in the consumer's consumption bundle. It indicates the rate at which the consumer can trade one good for another while staying within the budget constraint. The consumer chooses a consumption bundle where the marginal rate of substitution (MRS) equals the relative price of the goods. The MRS represents the rate at which the consumer is willing to substitute one good for another while maintaining the same level of satisfaction. When the MRS is equal to the relative price, the consumer achieves the maximum utility possible within the budget constraint. Therefore, the reason provided correctly explains the relationship between the slope of the budget line and the consumer's choice of consumption bundle.
Question : Assertion: The concept of marginal utility becomes irrelevant when the consumer faces perfect competition.
Reason: In perfect competition, the consumer is a price taker and must accept the market price without considering individual preferences.
Question : Assertion: A consumer maximizes utility by consuming goods until the marginal utility per unit of money spent is equal across all goods.
Reason: The consumer aims to allocate their budget in a way that maximizes their overall satisfaction.
Option 1: Both the assertion and reason are true, and the reason is a correct explanation of the assertion
Question : Assertion: The concept of consumer surplus represents the difference between the price a consumer is willing to pay and the actual price they pay for a good.
Reason: Consumer surplus reflects the additional benefit or utility the consumer receives from purchasing a good.
Question : Assertion: The concept of the marginal rate of substitution (MRS) measures the rate at which a consumer is willing to trade one good for another while maintaining the same level of satisfaction.
Reason: The MRS is determined by the consumer's preferences and the relative marginal utilities of the two 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.
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