Question

Assertion (A): If a fall in price of Good X leads to a rise in demand for Good Y, then X and Y are complementary goods.

Reason (R): Complementary goods (say car & petrol) are used together. A fall in the price of petrol is likely to increase the demand of cars.

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.

Answer 1

Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).

Explanation:

Cars and petrol are complementary goods that must be consumed together to satisfy a single want. When the price of one complementary good declines, the overall cost of using the joint combination decreases dramatically, naturally motivating consumers to raise their purchase and demand for the other connected commodity. Because the reasoning directly establishes the inverse price-to-demand relationship with a practical example, it is the ideal logical explanation for the assertion.