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
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AStatement I is the cause and Statement II is its effect
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BStatement II is the cause and Statement I is its effect
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CBoth are independent causes
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DBoth are effects of independent causes
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EBoth 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