Read the following statements - Assertion (A) and Reasoning (R):
Assertion: Price ceiling is fixed above the market-determined price.
Reasoning: At the market-determined price, some section of the population will not be able to afford these goods.
Answer & explanation
Correct answer: option 4
The correct answer is Option 4: Assertion (A) is false but Reasoning (R) is true.
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Assertion (A): "Price ceiling is fixed above the market-determined price."
- This is false because a price ceiling is always set below the equilibrium price, not above it.
- The purpose of a price ceiling is to make essential goods (such as food, rent, or medicine) more affordable, which happens only when the price is artificially lowered below the equilibrium price.
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Reasoning (R): "At the market-determined price, some section of the population will not be able to afford these goods."
- This is true because market prices may sometimes be too high for certain consumers, leading to affordability issues.
- This is one of the main reasons governments impose price ceilings to make essential goods accessible to the lower-income population.