Question : Assertion: The price elasticity of demand for a product is determined solely by the availability of substitutes.
Reason: The more substitutes available for a product, the higher its price elasticity of demand.
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 price elasticity of demand for a product is determined solely by the availability of substitutes. This is correct. The availability of substitutes is one of the key factors that influence the price elasticity of demand for a product. When there are more substitutes available for a product, consumers have more options to choose from, making them more sensitive to changes in price. Therefore, the availability of substitutes plays a significant role in determining the price elasticity of demand.
The reason states that the more substitutes available for a product, the higher its price elasticity of demand. This is also correct and supports the assertion. When there are more substitutes available, consumers have more alternatives to choose from, making them more likely to switch to a substitute if the price of the product increases. As a result, the demand for the product becomes more elastic, and the price elasticity of demand is higher.
Therefore, both the assertion and reason are correct and related. The availability of substitutes directly influences the price elasticity of demand for a product.
