Question : Assertion: The demand for essential goods is generally inelastic.
Reason: Essential goods have limited substitutes, and consumers are less price-sensitive in their purchase decisions.
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 demand for essential goods is generally inelastic. This is generally correct. Essential goods are typically goods that are necessary for basic needs, such as food, housing, healthcare, and utilities. The demand for these goods tends to be less responsive to price changes because they are considered necessities, and consumers have limited alternatives or substitutes available. As a result, consumers are less price-sensitive in their purchase decisions for essential goods, leading to a relatively inelastic demand.
The reason provided states that essential goods have limited substitutes, and consumers are less price-sensitive in their purchase decisions. This reason supports the assertion. Limited substitutes mean that consumers have fewer alternatives to choose from, reducing their ability to switch to other products in response to price changes. Consequently, consumers are less likely to adjust their quantity demanded significantly, making the demand for essential goods more inelastic.
Therefore, both the assertion and reason are correct and related. The demand for essential goods is generally inelastic due to limited substitutes and consumers' reduced price sensitivity, as explained by the reason.
Question : Assertion: The demand for essential goods like food and water is generally inelastic.
Reason: Essential goods have limited substitutes, and consumers are willing to purchase them regardless of price changes.
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.
Question : Assertion: Perfectly inelastic demand implies that consumers are unresponsive to changes in price.
Reason: In perfectly inelastic demand, the quantity demanded remains the same regardless of price changes.
Question : Assertion: Cross elasticity of demand is positive when two goods are substitutes.
Reason: Substitutes are alternative goods that can be used in place of each other, so an increase in the price of one leads to an increase in demand for the other.
Question : Assertion: The demand for a product is perfectly inelastic when quantity demanded remains constant regardless of price changes.
Reason: Perfectly inelastic demand occurs when the price elasticity of demand is zero.
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