Question : Assertion (A): Cross demand occurs when the amount of one good is changed because the price of another one has changed.
Reason (R): Shifts in consumer spending cause shifts in demand.
Option 1: Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A)
Option 2: Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A)
Option 3: Assertion (A) is true but Reason (R) is False
Option 4: Assertion (A) is False but Reason (R) is True
Correct Answer:
Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A)
Solution :
Changes in consumer income lead to a change in demand.
Demand is analyzed for cross-elasticity when it changes for reasons other than price.
When the price of one of the items varies, the cross elasticity of demand analyses the link between the two. It illustrates how the relative shift in demand for one good changes as the cost of the other increases or decreases.
Hence both are separate concepts of another factor so option b is the correct answer.
