{"id":15655,"date":"2012-11-27T13:47:32","date_gmt":"2012-11-27T20:47:32","guid":{"rendered":"https:\/\/gmatclub.com\/blog\/?p=15655"},"modified":"2012-11-27T13:47:32","modified_gmt":"2012-11-27T20:47:32","slug":"real-life-knowledge-you-need-to-know-for-the-gmat","status":"publish","type":"post","link":"https:\/\/gmatclub.com\/blog\/real-life-knowledge-you-need-to-know-for-the-gmat\/","title":{"rendered":"Real-Life Knowledge You Need to Know for the GMAT"},"content":{"rendered":"<p><a href=\"https:\/\/gmatclub.com\/blog\/wp-content\/uploads\/2012\/11\/investment.png\"><img loading=\"lazy\" decoding=\"async\" class=\"alignright size-full wp-image-15656\" title=\"investment\" src=\"https:\/\/gmatclub.com\/blog\/wp-content\/uploads\/2012\/11\/investment.png\" alt=\"investment\" width=\"150\" height=\"150\" \/><\/a>For the GMAT Verbal section, on Critical Reading and Reading Comprehension, you are not expected to have specialized expertise in the topics they discuss. Sometimes, though, it is particularly helpful to have general real world knowledge. If you make a habit of <a title=\"GMAT Reading List\" href=\"https:\/\/magoosh.com\/gmat\/2012\/gmat-reading-list\/\" target=\"_blank\">reading regularly<\/a>\u2013 either a good newspaper (the <em>New York Times<\/em>, the <em>Wall Street Journal<\/em>, etc.) or the <a href=\"https:\/\/magoosh.com\/gmat\/2012\/reading-for-the-gmat-the-economist\/\">Economist<\/a> magazine\u2013 then probably you will have a very good sense of the \u201cpush and pull\u201d of real world situations.<\/p>\n<p>If your GMAT is soon, and you don\u2019t have time to get up to speed with everything about the practicalities of business, economics, and politics in the real world, this is the first post in a series of five real-life areas you should be familiar with: knowing these can only help you interpret these verbal questions.<\/p>\n<p>Each article will have hyperlinks to articles with more information, if you find the content new or unfamiliar. Again, no question will automatically expect you to know any of these inside out, but insofar as you understand these, they will provide germane background, help you interpret the question, and help you to spot unrealistic incorrect answer choices.<\/p>\n<p>Here\u2019s the full list:<\/p>\n<ul>\n<li>Economics: Supply and Demand (below)<\/li>\n<li><a title=\"GMAT Labor and Wages\" href=\"https:\/\/magoosh.com\/gmat\/2012\/gmat-labor-and-wages\/\" target=\"_blank\">Economics: Labor and Wages<\/a><\/li>\n<li><a title=\"Inflation, Unemployment, and Interest Rates on the GMAT\" href=\"https:\/\/magoosh.com\/gmat\/2012\/inflation-unemployment-and-interest-rates-on-the-gmat\/\" target=\"_blank\">Economics: Inflation, unemployment, and interest rates<\/a><\/li>\n<li><a title=\"\u201cBeyond Any Reasonable Doubt\u201d on the GMAT\" href=\"https:\/\/magoosh.com\/gmat\/2012\/beyond-any-reasonable-doubt-on-the-gmat\/\" target=\"_blank\">Law: \u201cbeyond any reasonable doubt\u201d<\/a><\/li>\n<li><a title=\"Statistical Significance on the GMAT\" href=\"https:\/\/magoosh.com\/gmat\/2012\/statistical-significance-on-the-gmat\/\" target=\"_blank\">Statistics: Statistical significance<\/a><\/li>\n<\/ul>\n<p><strong>The Law of Supply and Demand<\/strong><\/p>\n<p>This is a must-know idea if you are heading toward business school. If you studied business or economics in your undergrad years, supply and demand should definitely be familiar ideas. When a product or service is for sale in the free market, as a general rule, there are two forces determining how much it will cost. <a href=\"https:\/\/en.wikipedia.org\/wiki\/Demand_(economics)\" target=\"_blank\"><strong>Demand<\/strong><\/a> concerns how much the potential consumers want the product or service \u2014 how willing they would be to pay a certain price for it. High demand means: people would simply line up to buy this product, even at a high price; low demand means that the product is hard to sell, that even lowering the price does little to spur sales of the product. <a href=\"https:\/\/en.wikipedia.org\/wiki\/Supply_(economics)\" target=\"_blank\"><strong>Supply<\/strong><\/a> concerns how easy it is to bring a certain product or service to market: for a given price, how willing\/able would producers be to bring this product or service to the market for sale. High supply means: the producers easily can bring tons of it to the market. Low supply, or short supply means: it\u2019s harder to produce the product, and producers can\u2019t make as many or as much as consumers would like to buy.<\/p>\n<p><strong>The <\/strong><a href=\"https:\/\/en.wikipedia.org\/wiki\/Law_of_supply_and_demand\" target=\"_blank\"><strong>Law<\/strong><\/a><strong> of Supply and Demand<\/strong> says that, in a free competitive marketplace, the price will come to equilibrium at that level at which supply equals demand. In other words, at this equilibrium price, the producers are willing to make N units, and the consumers are willing to buy N units. The Law of Supply and Demand implies \u2014 as a general rule, if a product or service becomes scarcer, harder to get or provide or make \u2014 i.e. supply drops \u2014 then usually the price will rise; and if a product or service becomes more plentiful, easier to get or provide or make \u2014 i.e. supply rises \u2014- then the price will tend to fall. For example, when world events threaten the supply of crude oil to the US, then the price of gas in the US rises. Similarly, when demand is very high, the price typically will be high, and when demand drops, usually the price will as well. Think of a new CD or DVD \u2014 when it\u2019s first released, everyone wants it \u2014 it\u2019s the new \u201chot\u201d thing \u2014 and since demand is high, the price it typically high; then wait a while \u2014 a few months, or certainly a few years later \u2014 inevitably interest in the item drops, and so does the price.<\/p>\n<p>The Law of Supply and Demand is <strong>not<\/strong> a universal rule. There are some rare example of items that do not follow the Law of Supply and Demand, for instance, a <a href=\"https:\/\/en.wikipedia.org\/wiki\/Veblen_good\">Veblan good<\/a> or a<\/p>\n<p><a href=\"https:\/\/en.wikipedia.org\/wiki\/Giffen_good\">Giffen good<\/a>. You do not need to know the technical details about these exceptions, but it\u2019s good to know that there <em>are<\/em> exceptions.<\/p>\n<p><strong>Summary<\/strong><\/p>\n<p>Knowledge of any of this is not \u201crequired\u201d for the GMAT, but the more familiar you are with these facts, the easier it will be to place arguments in context and identify unrealistic incorrect answer choices. Furthermore, if you want to demonstrate your competence in business school and beyond, it certainly would be a good idea to understand all of these things well!<\/p>\n<p>This article was written by Mike McGarry, GMAT expert at <a href=\"https:\/\/gmat.magoosh.com\/\">Magoosh GMAT Prep<\/a>, and originally posted <a href=\"https:\/\/magoosh.com\/gmat\/2012\/gmat-supply-and-demand\/\">here<\/a>.<\/p>\n<p><em><span class=\"full-image-block ssNonEditable\"><span><a href=\"https:\/\/blog.accepted.com\/wp-content\/uploads\/2011\/11\/logo-small-for-SF.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"alignleft size-full wp-image-4169\" style=\"border: 0pt none;\" title=\"Accepted.com\" src=\"https:\/\/blog.accepted.com\/wp-content\/uploads\/2011\/11\/logo-small-for-SF.jpg\" alt=\"Accepted.com\" width=\"111\" height=\"61\" \/><\/a><\/span><\/span><\/em> <em>Accepted.com ~ Helping You Write Your Best!<\/em><\/p>\n<p>&nbsp;<\/p>\n<p>Accepted.com's <a href=\"https:\/\/www.accepted.com\/aboutus\/AboutUs.aspx\" target=\"_blank\">experienced admissions consultants<\/a> can help you create the most impressive application possible with <a href=\"https:\/\/www.accepted.com\/Services\/MBAProgramServices.aspx\" target=\"_blank\">comprehensive packages<\/a>,<strong><em> <\/em><\/strong>or provide targeted assistance from <a href=\"https:\/\/www.accepted.com\/services\/mba\/admissionsconsulting.aspx\" target=\"_blank\">picking perfect programs<\/a> to <a href=\"https:\/\/www.accepted.com\/mba\/admissionsresume.aspx\" target=\"_blank\">designing a dazzling resume<\/a>, <a href=\"https:\/\/www.accepted.com\/mba\/essayediting.aspx\" target=\"_blank\">constructing engaging essays<\/a>, or <a href=\"https:\/\/www.accepted.com\/mba\/interviewservices.aspx\" target=\"_blank\">preparing for intense interview<\/a><a href=\"https:\/\/www.accepted.com\/mba\/interviewservices.aspx\" target=\"_blank\">s<\/a>\u2026and more! Accepted.com has guided thousands of applicants to acceptances at top MBA programs since 1994 \u2013 we know what works and what doesn't, so <a href=\"https:\/\/www.accepted.com\/contactus.aspx\" target=\"_blank\">contact us<\/a> to get started now!<\/p>\n<p><em>This article originally appeared on the <a href=\"https:\/\/blog.accepted.com\/2012\/11\/26\/real-life-knowledge-you-need-to-know-for-the-gmat\/\" target=\"_blank\">Accepted Admissions Consulting Blog<\/a>, the official blog of Accepted.com.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>For the GMAT Verbal section, on Critical Reading and Reading Comprehension, you are not expected to have specialized expertise in the topics they discuss. Sometimes, though, it is particularly helpful&#8230;<\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11,939,775,113],"tags":[1894,583,163,164,361,382,666,154],"class_list":["post-15655","post","type-post","status-publish","format-standard","hentry","category-mba","category-accepted","category-admission-consultants","category-applications","tag-gmat","tag-gmat-advice","tag-gmat-critical-reasoning","tag-gmat-reading-comprehenshion","tag-gmat-tips","tag-gmat-verbal","tag-gmat-verbal-strategy","tag-verbal-gmat","entry"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/gmatclub.com\/blog\/wp-json\/wp\/v2\/posts\/15655","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/gmatclub.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gmatclub.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gmatclub.com\/blog\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/gmatclub.com\/blog\/wp-json\/wp\/v2\/comments?post=15655"}],"version-history":[{"count":1,"href":"https:\/\/gmatclub.com\/blog\/wp-json\/wp\/v2\/posts\/15655\/revisions"}],"predecessor-version":[{"id":15657,"href":"https:\/\/gmatclub.com\/blog\/wp-json\/wp\/v2\/posts\/15655\/revisions\/15657"}],"wp:attachment":[{"href":"https:\/\/gmatclub.com\/blog\/wp-json\/wp\/v2\/media?parent=15655"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gmatclub.com\/blog\/wp-json\/wp\/v2\/categories?post=15655"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gmatclub.com\/blog\/wp-json\/wp\/v2\/tags?post=15655"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}