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Guy's net income equals his gross income minus his deduction [#permalink]
01 Oct 2012, 04:25

Expert's post

12

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00:00

A

B

C

D

E

Difficulty:

35% (medium)

Question Stats:

66% (02:11) correct
34% (01:04) wrong based on 581 sessions

Guy's net income equals his gross income minus his deductions. By what percent did Guy's net income change on January 1, 1989, when both his gross income and his deductions increased?

(1) Guy's gross income increased by 4 percent on January 1, 1989. (2) Guy's deductions increased by 15 percent on January 1, 1989.

Practice Questions Question: 55 Page: 279 Difficulty: 600

Re: Guy's net income equals his gross income minus his deduction [#permalink]
01 Oct 2012, 04:26

1

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SOLUTION

Guy's net income equals his gross income minus his deductions. By what percent did Guy's net income change on January 1, 1989, when both his gross income and his deductions increased?

Given: Net Income = Gross Income - Deductions.

(1) Guy's gross income increased by 4 percent on January 1, 1989. No info about deductions. Not sufficient. (2) Guy's deductions increased by 15 percent on January 1, 1989. No info about gross income. Not sufficient.

(1)+(2) If Gross Income=100 and Deductions=100, then Guy had decrease in Net Income (since Deductions increased by greater percent than Gross Income) BUT if Gross Income=1,000 and Deductions=100, then Guy had some increase in Net Income. So, we cannot get the percent by which Guy's net income changed on January 1, 1989. Not sufficient.

Re: Guy's net income equals his gross income minus his deduction [#permalink]
01 Oct 2012, 19:04

1) No info about Deduction - Insufficient 2) No info about Gross income - Insufficient 1+2) New Income = 1.04 G + 1.15 D New Income will vary for different relative values of Gross Income & Deductions - Insufficient

Answer E _________________

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Re: Guy's net income equals his gross income minus his deduction [#permalink]
04 Oct 2012, 14:09

Expert's post

SOLUTION

Guy's net income equals his gross income minus his deductions. By what percent did Guy's net income change on January 1, 1989, when both his gross income and his deductions increased?

Given: Net Income = Gross Income - Deductions.

(1) Guy's gross income increased by 4 percent on January 1, 1989. No info about deductions. Not sufficient. (2) Guy's deductions increased by 15 percent on January 1, 1989. No info about gross income. Not sufficient.

(1)+(2) If Gross Income=100 and Deductions=100, then Guy had decrease in Net Income (since Deductions increased by greater percent than Gross Income) BUT if Gross Income=1,000 and Deductions=100, then Guy had some increase in Net Income. So, we cannot get the percent by which Guy's net income changed on January 1, 1989. Not sufficient.

Answer: E.

Kudos points given to everyone with correct solution. Let me know if I missed someone. _________________

Re: Guy's net income equals his gross income minus his deduction [#permalink]
04 Oct 2012, 16:27

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I like those kind of questions because are almost pure logic without to stay too much thinking about numbers.

\(NI = net income\)

\(GI = gross income\)

\(Ded= deduction\)

\(NI = GI - Ded\)

1) we have only GI

2) we have only Ded

Both are insuff

Now is the most abstract part that you have to understand very carefully: if GI increase by 4% and Ded by 15% if we do not have a clear anchor point: GI even with a small variation could be larger than Ded so we could have a NI BUT if we have the reverse situation we would not have NI because the Ded could be larger than GI and the latter would disappear without to establish with security NI

Re: Guy's net income equals his gross income minus his deduction [#permalink]
04 May 2014, 07:57

Bunuel wrote:

marcovg4 wrote:

I have a question:

If the problem provided with a Gross and Deduction ratio, then the correct answer would have been be C?

Since we are looking for a percent change, it doesn't matter actual values, right?

Yes, you are right.

Hi Bunuel,

I came here to ask the same question, although I was expecting a different answer.

If we have an original ratio of Gross/Deduc, and they gave us the adjusted Gross/Deduc -- that would just mean that we have a new ratio for Gross/Deduc, correct?

If we compare the two ratios, don't we just get a old net/new net? Without knowing the anchor points, how can we still classify that as a change, wouldn't it instead just be a ratio? Meaning, a ratio of new/old could be 5/4, so the new net could be 100 and the old could be 80. Using the same theory, it could also be 200/160. The dollar amount has a much bigger change in the second example?

Guy's net income equals his gross income minus his deduction [#permalink]
04 Nov 2014, 12:13

russ9 wrote:

Bunuel wrote:

marcovg4 wrote:

I have a question:

If the problem provided with a Gross and Deduction ratio, then the correct answer would have been be C?

Since we are looking for a percent change, it doesn't matter actual values, right?

Yes, you are right.

Hi Bunuel,

I came here to ask the same question, although I was expecting a different answer.

If we have an original ratio of Gross/Deduc, and they gave us the adjusted Gross/Deduc -- that would just mean that we have a new ratio for Gross/Deduc, correct?

If we compare the two ratios, don't we just get a old net/new net? Without knowing the anchor points, how can we still classify that as a change, wouldn't it instead just be a ratio? Meaning, a ratio of new/old could be 5/4, so the new net could be 100 and the old could be 80. Using the same theory, it could also be 200/160. The dollar amount has a much bigger change in the second example?

BUMP.

Suppose, original ratio is given as Gr:De = 100 : 80 .....[Also, assuming it as smart number] Then, 1+2) New Gr : De = 1.04*100 : 1.15*80 => 104 : 92 New NI = 12 Old NI = 20 We get (12-20)/20 = -8/20 = 40 percent decrease. The NI is supposed to increase and but due to the higher De percentage, NI decreased. Is it sufficient or not?

...or am I lost?

Update 1: NI can increase/decrease because the questions says what percent NI change.

gmatclubot

Guy's net income equals his gross income minus his deduction
[#permalink]
04 Nov 2014, 12:13

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