Assertion (A): A producer’s ex post investment can turn out to be less than her ex ante investment.
Reason (R): An unforeseen rise in demand may force the producer to sell goods from her stock.
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Both (A) and (R) are true and (R) is the correct explanation of (A).
Assertion (A): A producer’s ex post investment can turn out to be less than her ex ante investment. — True. A producer who plans to add Rs 100 to her stock but sells Rs 30 from it ends up investing only Rs 70.
Reason (R): An unforeseen rise in demand may force the producer to sell goods from her stock. — True. Extra sales are met out of stock.
A is about actual investment falling short of the plan. R is about unexpected sales from stock.
Why R explains A? When the producer sells goods from her stock to meet the extra demand, her stock rises by less than she planned. So her actual (ex post) investment is less than her planned (ex ante) investment.
NCERT (2026-27): “4.1 Aggregate Demand and its Components … Similarly, investment can mean the amount a producer plans to add to her inventory. It may be different from what she ends up doing. Suppose the producer plans to add Rs 100 worth goods to her stock by the end of the year. Her planned investment is, therefore, Rs 100 in that year. However, due to an unforeseen upsurge of demand for her goods in the market the volume of her sales exceeds what she had planned to sell and, to meet this extra demand, she has to sell goods worth Rs 30 from her stock. Therefore, at the end of the year, her inventory goes up by Rs (100 – 30) = Rs 70 only. Her planned investment is Rs 100 whereas her actual, or ex post, investment is Rs 70 only.” |