Read the following statements - Assertion (A) and Reasoning (R):
Assertion: Black marketing is a consequence of price ceiling.
Reasoning: A market where commodity is sold at prices higher than minimum price set by the government is a black market.
Answer & explanation
Correct answer: option 3
The correct answer is Option 3: Assertion (A) is true but Reasoning (R) is false.
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Assertion (A): "Black marketing is a consequence of price ceiling."
- This is true because a price ceiling is a maximum price limit set by the government, usually below the equilibrium price.
- This creates shortages, leading to illegal sales at higher prices, known as black marketing.
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Reasoning (R): "A market where a commodity is sold at prices higher than the minimum price set by the government is a black market."
- This is false because minimum price refers to a price floor (not a price ceiling).
- In the case of a price floor, the government sets a minimum price above equilibrium (e.g., Minimum Support Price for farmers).
- Black marketing happens due to price ceilings, not price floors.