Read the following statements - Assertion (A) and Reason (R):
Assertion: AD curve starts from above the origin.
Reasoning: When income is zero, there will be zero consumption.
From the given alternatives choose the correct one:
Answer & explanation
Correct answer: option 3
The correct option is: Option 3: Assertion (A) is true but Reason (R) is false.
Explanation:
Assertion (A) states that the AD (Aggregate Demand) curve starts from above the origin. This is true. The AD (Aggregate Demand) curve typically starts above the origin (zero on both the x and y-axis). This means even at zero income (x-axis), there's some positive consumption (y-axis). This can be due to factors like borrowing or using savings.
Reason (R) claims that when income is zero, there will be zero consumption. This statement is not necessarily true. AD curve starts from above the origin implying that even when income is zero, there will be some consumption. This consumption is referred as autonomous consumption. Even when income is zero, consumption can still occur through borrowing or dissaving.Therefore, Reason (R) is false.