Step 1:
Under the Indian Contract Act, display of goods with price tags in a shop is only an invitation to customers to make an offer.
Step 2:
When the customer offers to buy the product, it is merely an offer.
The shopkeeper may accept or reject that offer.
Step 3:
• Assertion is correct because seller can refuse sale
• Reason is also correct because display is not a legal offer
Further, the reason correctly explains the assertion.
Step 4:
Therefore:
\[
\boxed{\text{Both (A) and (R) are correct and (R) correctly explains (A)}}
\]
Hence, the correct answer is:
\[
\boxed{\text{(1)}}
\]