Economist: The law of demand predicts that as the price of a good goes down, demand for that good will increase, and vice-versa. In a recent experiment, economists gave coupons for rice to families in a province of China, where it is a staple food. The coupons effectively lowered the cost of rice, and should have led the families to buy more of it. Instead, households given the coupons purchased less rice than a control group who did not receive coupons.
Which of the following, if true, most helps to explain the amount of rice purchased by families who received coupons?
Coupons for rice is not used for purchasing more rice than must have been used to for other purpose. Among the choices only D and E are close.
D shows why coupons were not used for buying rice.
E on the other hand says that families with coupons had more disposable money to spend on other things. But even if that's the case they should have purchased rice given that they had the coupons with them all the time. The coupons could not have been used for other purchases.
(A) Chinese families spend an unusually high proportion of their income on rice.
(B) The prices of staple goods, including foodstuffs such as rice, do not fluctuate as much as those of non-necessary goods, such as consumer electronics.
(C) In the months before and after the experiment, the average per-family consumption of rice in the Chinese province steadily decreased.
(D) Many of the families given coupons discovered that they could sell the coupons on the black market.
(E) The availability of the coupons meant that families had more money to spend on other things, including more expensive substitutes for rice.
IMO Answer D.
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