Question : Assertion: When the price of a product increases, and its total revenue decreases, the demand for that product must be inelastic.
Reason: Inelastic demand implies that an increase in price leads to a proportionately smaller decrease in quantity demanded, resulting in lower total revenue.
Option 1: Both the assertion and reason are correct and related.
Option 2: Both the assertion and reason are correct but not related.
Option 3: The assertion is correct, but the reason is incorrect.
Option 4: The assertion is incorrect, but the reason is correct.
Correct Answer: Both the assertion and reason are correct and related.
Solution : The correct answer is (A) Both the assertion and reason are correct and related.
When the price of a product increases, and its total revenue decreases, it indicates that the demand for that product is likely to be inelastic. Inelastic demand means that the percentage change in quantity demanded is proportionately smaller than the percentage change in price. When the price increases, the decrease in quantity demanded is not sufficient to offset the price increase, leading to a decrease in total revenue.
The reason provided supports the assertion by explaining that inelastic demand implies a proportionately smaller decrease in quantity demanded in response to an increase in price, which results in lower total revenue. This aligns with the concept of inelastic demand.
Therefore, both the assertion and reason are correct and related.
