Question

I. Govt increased import duty on electronics.
II. Prices of locally made electronics remain unchanged.

• A. Statement I is the cause, and Statement II is its effect.
• B. Statement II is the cause, and Statement I is its effect.
• C. Both I and II are Ind. causes
• D. Both I and II are effects of independent causes

Hint:

In cause-and-effect questions, identify the action or event versus the outcome or situation. A government policy change is almost always a 'cause' that will lead to economic 'effects'.

Answer 1

The Correct Option is A

Step 1: Understanding the Question:
We need to analyze the two statements and determine if there is a cause-and-effect relationship between them.
Step 2: Detailed Explanation:
Statement I describes an action taken by the government: increasing the import duty on electronics. An import duty is a tax on imported goods. Increasing this duty makes imported electronics more expensive for consumers in the country.
Statement II describes a market condition: the prices of electronics made within the country have not changed.
Let's analyze the relationship:
A primary reason for a government to increase import duties (Statement I) is to protect domestic industries from foreign competition. By making imported goods more expensive, locally made goods become relatively cheaper or more attractive. This reduces the competitive pressure on local manufacturers to lower their prices. Therefore, the action in Statement I allows local manufacturers to maintain their prices (Statement II) without losing market share to cheaper imports. In this context, the government's action is the cause, and the stability of local prices is an effect or a resulting condition.
Let's check other options:
- (B) It is illogical to assume that because local prices are unchanged, the government increased import duty. The government's action is a policy decision, not an effect of stable prices.
- (C) & (D) The two statements are clearly related through economic principles. Statement I is a direct action (a cause), while Statement II is an observation (likely an effect or related condition). So, treating them as independent is less likely to be correct.
Step 3: Final Answer:
The most logical relationship is that the government's increase in import duty (Cause) helped stabilize the market for local producers, allowing their prices to remain unchanged (Effect).