Question : Assertion: The demand for addictive goods like cigarettes and alcohol is generally elastic.
Reason: Addictive goods have readily available substitutes, and consumers are more likely to reduce their consumption in response to price increases.
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: The assertion is correct, but the reason is incorrect.
Solution : The correct answer is (C) The assertion is correct, but the reason is incorrect.
The assertion is correct because the demand for addictive goods like cigarettes and alcohol tends to be relatively elastic. Elasticity of demand measures the responsiveness of quantity demanded to changes in price. In the case of addictive goods, consumers often have access to substitutes or alternatives, and they may be more willing to reduce their consumption in response to price increases.
However, the reason provided is incorrect. It states that addictive goods have readily available substitutes, but this is not always the case. While some consumers may switch to substitutes or reduce their consumption, addiction can create a strong psychological and physiological dependence on these goods, making the demand somewhat inelastic in certain situations. The reason oversimplifies the complexity of consumer behavior and the factors influencing demand for addictive goods.
