Assertion (A): A hike in the salaries of consumers raises the equilibrium price of clothes when the number of firms is fixed.
Reason (R): A rise in consumers’ income shifts the supply curve of clothes to the left.
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → (A) is true but (R) is false.
Clothes are a normal good, so higher income raises their demand. The demand curve shifts right, and the supply curve stays where it is.
Assertion (A): A hike in the salaries of consumers raises the equilibrium price of clothes when the number of firms is fixed. — True. With demand shifted right and supply unchanged, the new equilibrium has a higher price and a higher quantity of clothes.
Reason (R): A rise in consumers’ income shifts the supply curve of clothes to the left. — False. Income affects buyers, not firms. The supply curve shifts only with technology or the cost of production, so income leaves it unchanged.
NCERT (2026-27): “Demand Shift … Suppose due to a hike in the salaries of the consumers, their incomes increase. … With an increase in income, consumers are able to spend more money on some goods. But recall from Chapter 2 that the consumers will spend less on an inferior good with increase in income whereas for a normal good, with prices of all commodities and tastes and preferences of the consumers held constant, we would expect the demand for the good to increase at each price as a result of which the market demand curve will shift rightward. Here we consider the example of a normal good like clothes, the demand for which increases with increase in income of consumers, thereby causing a rightward shift in the demand curve. However, this income increase does not have any impact on the supply curve, which shifts only due to some changes in the factors relating to technology or cost of production of the firms. Thus, the supply curve remains unchanged. In the Figure 5.2 (a), this is shown by a shift in the demand curve from DD0 to DD2 but the supply curve remains unchanged at SS0. From the figure, it is clear that at the new equilibrium, the price of clothes is higher and the quantity demanded and sold is also higher.” |