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Investing in real estate would be a profitable venture at [#permalink]
14 Sep 2006, 09:12
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Investing in real estate would be a profitable venture at this time. A survey in House magazine revealed that 85% of the magazineâ€™s readers are planning to buy a second home over the next few years. A study of the real estate industry, however, revealed that the current supply of homes could only provide for 65% of that demand each year.
Which of the following, if true, reveals a weakness in the evidence cited above?
(A) Real estate is a highly labor-intensive business.
(B) Home builders are not evenly distributed across the country.
(C) The number of people who want second homes has been increasing each year for the past ten years.
(D) Readers of House magazine are more likely than most people to want second homes.
(E) House magazine includes articles about owning a second home as well as articles about building a second home.
First I know the only possible answer through elimination is D
I know this has been discussed before, but I just seem to figure out why logically the correct answer is D!
According to me D strengthens the evidence.
1. Assume 500 people in this world
2. Assume 100 people read this magazine
3. 85% of the magazine readers want a second house = 85 people want a new house
4 therefore currently there is a demand for 85 houses
5 houses that can be currently supplied is only 65% of 85 houses , approx 55 houses.
6. So if i want to start a real estate business I know all my houses are going to get sold because there is demand for 85 houses whereas the supply is only 55.
Now what D says is that the magazine readers are most likely to buya second home than the others. Doesn't this strengthen the evidence?
Another example, lets say there are 85 people who want a marble each for sure. Let's assume you have 55 marbles . Woudnt it be that I can sell all my marbles at a premium and make a good profit?
Exactly my point. Even we assume that the magazine readers represent 99% of all people , the demand of 85 houses will only grow as the % of (Magazine readers / All people ) reduces!
Hmm, I think you're getting mixed up a bit.
If 85% of House Magazine readers are planning on buying a house soon, but House Magazine readers are only 1% of the population (just an example), then you can't assume that percentage would be evenly distributed to the rest of the country. Obviously people who read a magazine about Houses are more interested in buying or selling a House than the average person, so the results of their survey may be skewed.
Ok lets take the 1% example. Assume 100 readers of the magazine already demading 85 houses. Total number of people = (100 * 100) = 10000. The current MAX supply is 55 houses.
Even if we assume that 1 person out of the remaining 9900 who do not read the magazine says that he is looking for a second home , that ony hikes up the demand more, withouth affecting the supply , right?
More demand for houses the better i'll be to start a real investement business.[/quote]