Question

Given below are two statements, one is labelled as Assertion (A) and other one labelled as Reason (R).
Assertion (A): The total expenditure made by a consumer on a normal good decreases with the increase in its price.
Reason (R): The price elasticity of demand for the good is elastic ($\text{E}_p > 1$). In light of the above statements, choose the most appropriate answer from the options given below:

• A. Both (A) and (R) are correct and (R) is the correct explanation of (A).
• B. Both (A) and (R) are correct but (R) is NOT the correct explanation of (A).
• C. (A) is correct but (R) is not correct.
• D. (A) is not correct but (R) is correct.

Hint:

Elastic demand (\(\text{E}_p > 1\)): Price up $\to$ Expenditure down. Inelastic demand (\(\text{E}_p < 1\)): Price up $\to$ Expenditure up.

Answer 1

The Correct Option is D

Step 1: Total expenditure \(TE = P \times Q\).
Step 2: If \(E_p > 1\) (elastic), a price rise reduces \(TE\); if \(E_p < 1\), \(TE\) rises instead.
Step 3: (A) states this fall happens for a normal good in general, without the elastic condition, so (A) is false.
Step 4: (R) correctly states \(E_p > 1\) as a standalone fact, so (R) is true.
\[ \boxed{\text{Option (4): (A) is false, (R) is true}} \]