Read the below statements marked as Assertion (A) and Reason (R). Mark the correct option:
Assertion (A): In macroeconomics, treating a single commodity as representative of all goods allows simplification of aggregate analysis.
Reason (R): This is because all individual goods always behave identically under inflationary trends.
Show answer & explanation
Correct answer: C
Explanation
The correct answer is option 3 i.e. A is true, but R is false.
In macroeconomics, we use a representative good to simplify complex aggregate analysis, allowing us to study the general price level or total output without getting bogged down in millions of individual products. This makes the Assertion true. However, the Reason is false because individual goods do not behave identically; for instance, during inflation, the price of fuel might skyrocket while the price of electronics remains stable or even falls due to technological advances.