Question

Assertion (A):
As per Psychological law of consumption, when aggregate income increases, consumption expenditure also increases but by a somewhat smaller amount.
Reason (R):
As income increases, more and more of our wants get satisfied and lesser amounts are spent out of subsequent increases in income.

• A. Both (A) and (R) are correct and (R) is the correct explanation of (A)
• B. Both (A) and (R) are correct but (R) is not the correct explanation of (A)
• C. (A) is correct but (R) is not correct
• D. (A) is not correct but (R) is correct

Hint:

Logic Tip: As income rises, saving rises faster than consumption.

Answer 1

The Correct Option is A

Step 1:
According to Keynes, consumption increases with increase in income, but not in the same proportion.

Step 2:
As income rises, many wants become satisfied and people tend to save a larger portion of additional income.

Step 3:

• Assertion is correct
• Reason is also correct
• Reason correctly explains the assertion

Step 4:
Hence, the correct answer is: \[ \boxed{\text{(1)}} \]