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Both A and R are true and R is the correct explanation of A. b) Both A and R are true but R is not the correct explanation of A. c) A is true but R is false. d) A is false but R is true. 7. Assertion (A): The positive relationship between demand and price occurs in the case of Giffen goods. Reason (R): There exists a very high positive income effect.?
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Both A and R are true and R is the correct explanation of A. b) Both A...
B) Both A and R are true but R is not the correct explanation of A.
Explanation:
Giffen goods are a type of inferior goods where the demand for the good increases as the price increases. This is contrary to the law of demand, which states that as the price of a good increases, the quantity demanded decreases.
Assertion (A): The positive relationship between demand and price occurs in the case of Giffen goods.
This statement is true. Giffen goods are unique because they exhibit an upward-sloping demand curve, meaning that as the price of the good increases, the quantity demanded also increases. This positive relationship between demand and price is contrary to the general pattern observed in most goods.
Reason (R): There exists a very high positive income effect.
This statement is not the correct explanation of A. The reason for the positive relationship between demand and price for Giffen goods is not solely due to a high positive income effect. The income effect refers to the change in quantity demanded of a good due to a change in consumer's income. In the case of Giffen goods, the income effect is not the primary driver of the positive relationship between demand and price.
The correct explanation for the positive relationship between demand and price for Giffen goods lies in the substitution effect. The substitution effect occurs when consumers switch from a more expensive good to a cheaper alternative as its price increases. However, in the case of Giffen goods, there are no close substitutes available or the substitutes are of lower quality and less desirable. Therefore, as the price of the Giffen good increases, consumers are forced to buy more of it, even though its price has increased.
In conclusion, both the assertion and reason are true, but the reason is not the correct explanation of the assertion. The positive relationship between demand and price for Giffen goods is primarily driven by the absence of close substitutes, rather than a high positive income effect.
Explanation:
Giffen goods are a type of inferior goods where the demand for the good increases as the price increases. This is contrary to the law of demand, which states that as the price of a good increases, the quantity demanded decreases.
Assertion (A): The positive relationship between demand and price occurs in the case of Giffen goods.
This statement is true. Giffen goods are unique because they exhibit an upward-sloping demand curve, meaning that as the price of the good increases, the quantity demanded also increases. This positive relationship between demand and price is contrary to the general pattern observed in most goods.
Reason (R): There exists a very high positive income effect.
This statement is not the correct explanation of A. The reason for the positive relationship between demand and price for Giffen goods is not solely due to a high positive income effect. The income effect refers to the change in quantity demanded of a good due to a change in consumer's income. In the case of Giffen goods, the income effect is not the primary driver of the positive relationship between demand and price.
The correct explanation for the positive relationship between demand and price for Giffen goods lies in the substitution effect. The substitution effect occurs when consumers switch from a more expensive good to a cheaper alternative as its price increases. However, in the case of Giffen goods, there are no close substitutes available or the substitutes are of lower quality and less desirable. Therefore, as the price of the Giffen good increases, consumers are forced to buy more of it, even though its price has increased.
In conclusion, both the assertion and reason are true, but the reason is not the correct explanation of the assertion. The positive relationship between demand and price for Giffen goods is primarily driven by the absence of close substitutes, rather than a high positive income effect.
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Both A and R are true and R is the correct explanation of A. b) Both A and R are true but R is not the correct explanation of A. c) A is true but R is false. d) A is false but R is true. 7. Assertion (A): The positive relationship between demand and price occurs in the case of Giffen goods. Reason (R): There exists a very high positive income effect.?
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Both A and R are true and R is the correct explanation of A. b) Both A and R are true but R is not the correct explanation of A. c) A is true but R is false. d) A is false but R is true. 7. Assertion (A): The positive relationship between demand and price occurs in the case of Giffen goods. Reason (R): There exists a very high positive income effect.? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Both A and R are true and R is the correct explanation of A. b) Both A and R are true but R is not the correct explanation of A. c) A is true but R is false. d) A is false but R is true. 7. Assertion (A): The positive relationship between demand and price occurs in the case of Giffen goods. Reason (R): There exists a very high positive income effect.? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Both A and R are true and R is the correct explanation of A. b) Both A and R are true but R is not the correct explanation of A. c) A is true but R is false. d) A is false but R is true. 7. Assertion (A): The positive relationship between demand and price occurs in the case of Giffen goods. Reason (R): There exists a very high positive income effect.?.
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