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:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → A and B only
The four statements deal with four separate ideas from the theory of demand: the demand function, the slope of the demand curve, the income and substitution effects of a price change, and the market demand curve.
A. The demand function is a relation between the amount of the good and its price when other things remain same. Correct. How much of a good a consumer buys depends on its price, the prices of other goods, income and tastes. The demand function isolates one of these: it relates the quantity demanded to the price of the good while all the other factors are held unchanged. Its graph is the demand curve.
B. The slope of the demand curve measures the rate at which demand changes with respect to its price. Correct. The slope of a curve tells how much the variable on one axis changes for a unit change in the other. For a linear demand curve d(p) = a − bp, demand falls by b units for every unit rise in price, so the slope measures the rate at which demand changes with price.
C. If the substitution effect is stronger than the income effect, then demand and price of good will have positive relation. Incorrect. A rise in price has two effects. By the substitution effect the good is now dearer than other goods, so the consumer buys less of it. By the income effect the consumer’s income buys less than before, which for an inferior good raises its demand. Demand rises with price only for a Giffen good, where the income effect is the stronger; when the substitution effect is stronger, demand still falls as price rises.
D. The market demand curve of a good can also be derived by adding individual demand curves vertically. Incorrect. The market demand at a price is the total of what all consumers buy at that price. So the quantities on the individual curves are added at each price, that is, the curves are added horizontally (horizontal summation), not vertically.
NCERT (2025-26): “Linear Demand … slope of the demand curve measures the rate at which demand changes with respect to its price. For a unit increase in the price of the good, the demand falls by b units.… …The demand function is a relation between the amount of the good and its price when other things remain unchanged. The demand curve is a graphical representation of the demand function. At higher prices, the demand is less, and at lower prices, the demand is more.… …The market demand curve of a good can also be derived from the individual demand curves graphically by adding up the individual demand curves horizontally …. This method of adding two curves is called horizontal summation.”
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