Assertion: Farmers will cultivate water intensive crops if water is supplied free, although the water resources in that region may be scarce.

Reasoning: If water is priced to reflect scarcity, farmers will cultivate crops suitable to the region.

Both Assertion (A) and reasoning (R) are correct and but R is not the correct explanation of A.

Some economists point out that subsidies do not allow prices to indicate the supply of a good. When electricity and water are provided at a subsidised rate or free, they will be used wastefully without any concern for their scarcity. Farmers will cultivate water intensive crops if water is supplied free, although the water resources in that region may be scarce and such crops will further deplete the already scarce resources. If water is priced to reflect scarcity, farmers will cultivate crops suitable to the region