Critical reasoning — identify implicit assumptions Statement: The government has decided to reduce its subsidy on LPG, while keeping the subsidy on kerosene unchanged. Assumptions: I. Households that purchase LPG can afford to pay a higher price. II. Many people will stop buying LPG and switch to kerosene.

Introduction / Context:
Public finance decisions about subsidies rest on judgments about affordability and equity. Here the state lowers LPG subsidy but keeps kerosene subsidy. We must identify which assumption underlies this policy choice.

Given Data / Assumptions:

• Policy: Reduce LPG subsidy; kerosene subsidy unchanged.
• Assumption I: LPG users can bear higher prices (greater ability to pay).
• Assumption II: Many users will shift from LPG to kerosene if LPG becomes costlier.

Concept / Approach:
Maintaining kerosene subsidy while reducing LPG support suggests an equity lens: protect relatively poorer kerosene users while expecting LPG buyers to absorb more cost. The decision does not require predicting a mass shift to kerosene; in fact, that would conflict with clean-fuel goals.

Step-by-Step Solution:

Verification / Alternative check:
Negate I (LPG users cannot afford higher price): the policy would be regressive and hard to justify. Negate II: Even if few switch, the affordability rationale still supports the decision.

Why Other Options Are Wrong:

• Only II / Either / Both: Introduce a speculative demand shift not required by the policy logic.
• Neither: Ignores the affordability basis.

Common Pitfalls:
Assuming that any price hike must forecast mass substitution; policy can target fiscal savings while trusting affordability among certain user segments.

Final Answer:
Only assumption I is implicit