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It is true that increasing demand for a limited number of

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Senior Manager
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It is true that increasing demand for a limited number of [#permalink] New post 07 Dec 2008, 15:04
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It is true that increasing demand for a limited number of products drives up the price of those products. However, if we cut tax rates, then people will retain a higher percentage of their income and will be encouraged to work harder and produce more. Therefore the increase in demand resulting from greater disposable income will not result in higher prices for the products available.

In the passage above, the author makes which of the following arguments?

A. Reducing taxes is likely to result in less disposable income.

B. Reducing taxes is likely to decrease demand.

C. Reducing taxes can fail to result in greater disposable income.

D. Reducing taxes will probably restrict the availability of certain products.

E Reducing taxes will not necessarily lead to increased prices.
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Re: CR-Taxes [#permalink] New post 07 Dec 2008, 16:12
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Re: CR-Taxes [#permalink] New post 07 Dec 2008, 20:55
E
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Re: CR-Taxes [#permalink] New post 07 Dec 2008, 21:47
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Re: CR-Taxes [#permalink] New post 08 Dec 2008, 14:39
I just hate CR questions... I just cant see why E is the solution... :(
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Re: CR-Taxes [#permalink] New post 08 Dec 2008, 20:26
E is the best choice
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Re: CR-Taxes [#permalink] New post 09 Dec 2008, 00:04
I choose E as my answer. just look at the conclusion of the argument: "Therefore the increase in demand resulting from greater disposable income will not result in higher prices for the products available."

From the conclusion, "greater disposable income" means reduced tax rate according to the argument. So option E stands as the best choice.
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Re: CR-Taxes [#permalink] New post 09 Dec 2008, 00:14
Unless there is a trap, E is the best choice.
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Re: CR-Taxes [#permalink] New post 09 Dec 2008, 05:27
No trap.
OA E.
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Re: CR-Taxes   [#permalink] 09 Dec 2008, 05:27
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