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Question
Assertion (A): A veblen good is one for which demand increases as the price increases.
Reason (R): Coarse cereals and tonned milk are examples of veblen goods.
Options
Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
Assertion (A) is true but Reason (R) is false.
Assertion (A) is false but Reason (R) is true.
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Solution
Assertion (A) is true but Reason (R) is false.
Explanation:
A Veblen good is an expensive luxury item such as high-end jewelry or a sports car that people purchase in huge quantities as the price rises solely to demonstrate wealth and social standing. In stark contrast, coarse cereals and toned milk are fundamental, low-cost inferior items rather than status symbols, implying that they are purchased out of necessity, and their demand actually decreases as consumer income rises. The reasoning is quite false because it incorrectly labels these low-cost staples as premium Veblen goods.
