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In some countries, real estate agents negotiating with

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In some countries, real estate agents negotiating with [#permalink] New post 22 Mar 2012, 23:58
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In some countries, real estate agents negotiating with prodpective clients who want to sell their houses all recommend initial asking prices that are as high as the current market permits. They do this because potential sellers are more likely to entrust their houses to the agent who values them highest. In a housing market with falling demand, the predictable result is a sharper drop in the number of houses sold than the drop in demand alone woyld account for.

Q) Which of the following, if true, best explains the result described as predictable above?

a) A drop in demand for houses depresses prices disproportionately if earlier strong demand stimulated much new construction.

b) Real estate agents do not earn the commission on houses they help sell umtil the slae is actually executed.

c) Many people sell their old house below the asking price in order to obtain the funds to buy a new one

d) In a housing market with rising demand, even houses that were originally overpriced usually sell at the asking price.

e) For many sellers of houses, the initial asking price comes to represent the true value, below which they will not sell.
[Reveal] Spoiler: OA
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Re: PT #14 CR 15 [#permalink] New post 23 Mar 2012, 01:17
Clearly (E).

A: Unrelated. We have no information about earlier strong demand.
B: Out of scope. The commission of the agents is not being discussed here.
C: Out of scope. Old and new houses are not being discussed here.
D: We are discussing a market with falling, not rising, demand. Out of scope.
E: CORRECT. If the initial asking price is the minimum that the seller will accept, a lot many more houses will remain unsold than could be explained by just a drop in demand. This will happen because less houses will be sold due to lesser demand AND even those houses that could have been sold (in spite of the reduced demand) will remain unsold because the owners perceive that the price being offered is too low
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Re: PT #14 CR 15 [#permalink] New post 09 Apr 2012, 13:24
Is this really resolve a paradox question. Isnt this an assumption question. Resolve does not have a conclusion
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Re: PT #14 CR 15 [#permalink] New post 09 Apr 2012, 15:51
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This indeed as a resolve the paradox question, because there is a sharper decrease in the number of homes sold than the drop in the market alone accounts for.

We need an answer choice that best explains this trend:

a) A drop in demand for houses depresses prices disproportionately if earlier strong demand stimulated much new construction.

Doesn't help explain the sharper drop in home sales.

b) Real estate agents do not earn the commission on houses they help sell until the sale is actually executed.

Whether agents earn commission doesn't explain why houses aren't sold.

c) Many people sell their old house below the asking price in order to obtain the funds to buy a new one.

Here we are dealing with sellers who sell low, not those who can't sell because their price is too high.

d) In a housing market with rising demand, even houses that were originally overpriced usually sell at the asking price.

We are dealing with a housing market with falling demand.

e) For many sellers of houses, the initial asking price comes to represent the true value, below which they will not sell.

This answer choice suggests that sellers will not go below a certain value because they believe that the house to be valued at the cost of their initial offer. Since their initial offer is high (the agent who makes the highest bid is more likely to be recruited), these sellers will unlikely be able to sell their homes. ANSWER
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Re: In some countries, real estate agents negotiating with [#permalink] New post 04 Jan 2014, 22:21
Hello from the GMAT Club VerbalBot!

Thanks to another GMAT Club member, I have just discovered this valuable topic, yet it had no discussion for over a year. I am now bumping it up - doing my job. I think you may find it valuable (esp those replies with Kudos).

Want to see all other topics I dig out? Follow me (click follow button on profile). You will receive a summary of all topics I bump in your profile area as well as via email.
Re: In some countries, real estate agents negotiating with   [#permalink] 04 Jan 2014, 22:21
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