Concept:
Labelling theory studies how society's labels influence identity and behaviour.
Step 1:
Labels assign identities to individuals and influence how society perceives them.
\[
A \text{ is correct}
\]
Step 2:
Labels often carry social judgments and stereotypes.
Step 3:
Labelling can affect all aspects of a person's social identity and may create negative perceptions.
\[
R \text{ is correct}
\]
Step 4:
The reason directly explains why labels are not neutral and how they influence social identity.
\[
R \text{ correctly explains } A
\]
Step 5:
Hence, both Assertion and Reason are correct, and Reason correctly explains Assertion.
\[
\boxed{\text{(1) Both (A) and (R) are correct and (R) is the correct explanation of (A)}}
\]