Assertion:. Densely populated countries have large volume of internal trade but little external trade.

Reasoning: In densely populated countries, most of the agricultural and industrial production is consumed in the local markets.

Both Assertion (A) and reasoning (R) are correct and R is the correct explanation of A.

The correct answer is option 1: Both Assertion (A) and reasoning (R) are correct and R is the correct explanation of A.

Assertion:. Densely populated countries have large volume of internal trade but little external trade. This statement is correct because in densely populated countries, a large domestic market exists where most goods are consumed within the country itself.

Reasoning: In densely populated countries, most of the agricultural and industrial production is consumed in the local markets. This statement is also correct because high population creates high internal demand for goods and services.

Why Reason (R) correctly explains Assertion (A): The Reason explains that due to large local consumption, most agricultural and industrial products are used within the country. As a result, internal trade becomes large while comparatively less surplus is available for external trade. Thus, the Reason correctly explains the Assertion.

NCERT: "Size of population: Densely populated countries have large volume of internal trade but little external trade because most of the agricultural and industrial production is consumed in the local markets. Standard of living of the population determines the demand for better quality imported products because with low standard of living only a few people can afford to buy costly imported goods.