Statement I: The cost of raw materials increased worldwide. Statement II: The prices of finished goods rose in the domestic market.
Correct answer: A. Statement I is the cause and Statement II is its effect.
- 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 statements are effects of a common cause.
- D. Both statements are independent.
Explanation
The correct answer is Option A: Statement I is the cause and Statement II is its effect. When the cost of raw materials increases globally, it often results in higher production costs for manufacturers. This cost increase is usually passed on to consumers as higher prices for finished goods. Option B is incorrect because the reverse relationship is not typically observed; rising prices of finished goods do not cause raw material costs to increase. Option C, suggesting a common cause, is less specific and doesn't directly address the clear cause-effect relationship. Option D, stating independence, ignores the economic link between these two statements.
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About Cause and Effect
Cause and effect questions examine whether one event produces another, whether both arise from a common factor, or whether their connection is only coincidental. They involve identifying preceding and resulting events, separating correlation from causation, and judging whether the stated evidence supports a direct, possible or unlikely relationship.
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