From the following two statements of Assertion (A) and Reasoning (R), indicate the correct code: Assertion (A): The quantity of a product demanded invariably changes inversely to changes in its price. Reason (R): The price effect is the net result of the positive substitution effect and negative income effect. Codes:
(A) is incorrect but (R) is correct.
Concept: The law of demand states that, other things equal, quantity demanded normally moves inversely to price, but this holds only as a general rule, not without exception. This assertion-reason item tests that law and its known exception, so each statement must be judged separately.
Assertion (A) claims that quantity demanded 'invariably' moves inversely to price. This is not correct, because the law of demand has an exception: for a Giffen good the demand curve slopes upward, so quantity demanded rises when price rises. For example, when the price of a staple like coarse grain rises, a very poor household may buy more of it because it can no longer afford costlier substitutes. The word 'invariably' therefore makes the assertion false.
Reason (R) states that the price effect is the net result of the substitution effect and the income effect. This is the correct decomposition: a change in price sets off a substitution effect (which is always price-inverse) and an income effect, and when the income effect is strongly negative (as for a Giffen good) it can outweigh the substitution effect, reversing the usual relationship. So (R) is correct, and it is in fact the reason the assertion cannot hold 'invariably'.
Option check: (A) being false rules out the codes that call (A) correct, and (R) being true rules out the codes that call (R) incorrect, leaving only the code that says (A) is wrong while (R) is right.
Hence (A) is incorrect but (R) is correct.
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