Question : Assertion: The concept of price elasticity of demand is not applicable to goods with perfectly elastic demand.
Reason: Perfectly elastic demand means that any increase in price will cause quantity demanded to drop to zero, making the concept of elasticity irrelevant.
Option 1: Both the assertion and reason are correct and related.
Option 2: Both the assertion and reason are correct but not related.
Option 3: The assertion is correct, but the reason is incorrect.
Option 4: The assertion is incorrect, but the reason is correct.
Correct Answer: Both the assertion and reason are correct and related.
Solution : The correct answer is (A) Both the assertion and reason are correct and related.
The assertion states that the concept of price elasticity of demand is not applicable to goods with perfectly elastic demand. This is correct. Perfectly elastic demand means that the quantity demanded becomes infinitely responsive to price changes, and any increase in price will cause quantity demanded to drop to zero. In such a case, the concept of elasticity, which measures the responsiveness of quantity demanded to price changes, becomes irrelevant as any price change will lead to a complete loss of demand.
The reason provided supports the assertion by explaining that perfect elasticity implies that any increase in price will cause quantity demanded to drop to zero, which indeed renders the concept of elasticity irrelevant.
Therefore, both the assertion and reason are correct and related.
