Question

Assertion (A): When demand is ‘inelastic’, we mean that quantity demanded does not change at all in response to a price change.

Reason (R): Demand for a commodity is said to inelastic for which price change causes relatively smaller change in quantity demanded.

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

Assertion (A) is false but Reason (R) is true.

Explanation:

The assertion is false because when the quantity demanded does not change at all in response to a price adjustment, this is referred to as perfectly inelastic demand (Ed = 0), not simply inelastic. Standard inelastic demand (Ed<1) indicates that price fluctuations result in a smaller percentage change in quantity desired. As a result, an assertion incorrectly employs an extreme case to define general inelastic demand, but the rationale provides the correct definition.