Question : Assertion: When the price of a product increases by 10%, and the quantity demanded decreases by 20%, the price elasticity of demand is 0.5.
Reason: Price elasticity of demand measures the percentage change in quantity demanded divided by the percentage change in price.
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 but not related.
Solution : The correct answer is (B) Both the assertion and reason are correct but not related.
The assertion and reason are both correct in isolation, but they are not directly related to each other. The assertion provides specific values for a price increase and quantity decrease, and states that the price elasticity of demand is 0.5. The reason correctly defines price elasticity of demand as the percentage change in quantity demanded divided by the percentage change in price.
However, the reason does not support or explain the specific values given in the assertion. The price elasticity of demand is calculated as the absolute value of the percentage change in quantity demanded divided by the percentage change in price. In this case, with a 20% decrease in quantity demanded and a 10% increase in price, the price elasticity of demand would be 2.0, not 0.5.
Therefore, while both the assertion and reason are individually correct, they are not directly related in terms of the specific values provided.
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