There are two statements marked as Assertion (A) and Reason (R). Mark your answer as per the options given below.
Assertion: In a specific period, there is no trade off between consumer goods and capital goods in an economy.
Reasoning: If an economy, produces more of consumer goods in a specific period, it is producing less of capital goods and viceversa.
Answer & explanation
Correct answer: option 4
The correct answer is Option 4: Assertion (A) is not true but Reasoning (R) is correct.
Assertion: In a specific period, there is no trade off between consumer goods and capital goods in an economy. This is incorrect. In a specific time period, say in a year, the total production of final goods can be either in the form of consumption or investment. This implies that there is a trade-off. In any economy with limited resources, producing more consumer goods means allocating fewer resources to capital goods, and vice-versa. Therefore, there is always a trade-off.
Reasoning: If an economy, produces more of consumer goods in a specific period, it is producing less of capital goods and viceversa. This is correct.
"In respect of the total final output produced in an economy, we see that there is output of consumer goods and services and output of capital goods. The consumer goods sustain the consumption of the entire population of the economy. Purchase of consumer goods depends on the capacity of the people to spend on these goods which, in turn, depends on their income. The other part of the final goods, the capital goods, are purchased by business enterprises. They are used either for maintenance of the capital stock because there are wear and tear of it, or they are used for addition to their capital stock. In a specific time period, say in a year, the total production of final goods can thus be either in the form of consumption or investment. This implies that there is a trade-off. If an economy, produces more of consumer goods, it is producing less of capital goods and viceversa."