Cause–Effect reasoning: Decide whether the tax policy change explains the subsequent price revision. Statement I: Car manufacturers recently increased prices of mid-sized cars. Statement II: The Government recently increased the duty on mid-sized cars. Choose the correct option describing the relationship.

Verbal Reasoning Cause and Effect Difficulty: Easy
Choose an option
  • 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 are independent causes
  • D
    Both are effects of independent causes
  • E
    Both are effects of a common cause

Answer

Correct Answer: Statement II is the cause and Statement I is its effect

Explanation

Given data

  • Manufacturers increased ex-showroom prices (Statement I).
  • Government raised duty on mid-sized cars (Statement II).

Reasoning Higher duty increases cost; firms typically pass part/all of the tax to buyers, leading to price hikes.

Causal chain Duty hike → higher cost → price increase.

Final Answer Statement II is the cause and Statement I is its effect

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