Statements: 1. The Government has imported large quantities of sugar as per…
2023
Statements:
1. The Government has imported large quantities of sugar as per trade agreement with other countries.
2. The prices of sugar in the domestic market have fallen sharply in the recent months.
- 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 the statements I and II are independent causes
- D.
Both the statements I and II are effects of independent causes
Show answer & explanation
Correct answer: A
Cause-and-effect statement questions test whether one statement is best read as the trigger for the other, or whether the two statements have no causal link between them at all -- either because each is itself an independent cause of something else, or because each is instead the effect of its own separate, unstated cause. The economic version of the trigger-and-outcome reading rests on the law of supply and demand: when the supply of a good rises while other market conditions -- demand, domestic production, existing stock -- stay roughly unchanged, its price falls.
Applying this here: the government's action of importing a large quantity of sugar under a trade agreement directly enlarges the sugar available in the domestic market, that is, it raises supply. The reported sharp fall in domestic sugar prices is exactly the outcome the law of supply and demand predicts from such a supply increase. A government's decision to sign and act on a trade import agreement, on the other hand, is a policy choice -- it is not something a market price movement can bring about. So the import action is best read as the trigger, and the price fall as the outcome it produces, rather than the other way round.
Checking the alternatives:
A price movement cannot compel a government to sign or act on a trade import agreement, so reversing the direction misassigns which event has the power to produce the other.
The two statements are not unrelated causes -- assuming other market conditions hold steady, the size of the import shipment has a direct, traceable bearing on domestic price through the supply channel.
Reading each statement as the effect of its own separate, unstated cause would require the price fall to have arisen from something other than the described import; but the import volume by itself already gives a direct and sufficient economic explanation for that price fall, so there is no need to posit a separate hidden cause behind either statement.