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# 12 Days of Christmas GMAT Competition - Day 10: In an isolated economy

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Re: 12 Days of Christmas GMAT Competition - Day 10: In an isolated economy [#permalink]
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In an isolated economy, the only two factors that can directly affect the market price of a commodity are changes in its supply and changes in consumer demand. In such an economy, the total consumer demand is directly proportional to the population size.

If the statements above are true, then it is also true that in this isolated economy:

(A) any increase in the market price of a commodity is the result of a decrease in its supply
We dont know impact of price from passage

(B) if the population size remains constant, an increase in the supply of a commodity will lead to a decrease in its market price
Since price is affected by demand and suppply and demand is constt hence supply will impact it

(C) if there is a decrease in the population size, then, other things being equal, the market price of commodities must increase
We dont know relation between size and price and by actual laws decrease in demand leads to decrease in price

(D) the market price of a commodity is inversely related to the size of the population
We are not told about correlation

(E) whatever changes in supply occur, there will be compensating changes in consumer demand
We are not told about relation supply and demand

Ans B
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Re: 12 Days of Christmas GMAT Competition - Day 10: In an isolated economy [#permalink]
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In an isolated economy, the only two factors that can directly affect the market price of a commodity are changes in its supply and changes in consumer demand. In such an economy, the total consumer demand is directly proportional to the population size.

If the statements above are true, then it is also true that in this isolated economy:

(A) any increase in the market price of a commodity is the result of a decrease in its supply
other factor ie, changes in consumer demand may act in a contradicting way -- not covered in the option

(B) if the population size remains constant, an increase in the supply of a commodity will lead to a decrease in its market price
correct deduction regarding decrease in market price with the increase in supply ( Note : - since constant population size means constant consumer demand)

(C) if there is a decrease in the population size, then, other things being equal, the market price of commodities must increase
'other tings being equal' is too vague a phrase to align with prediction regarding the supply of the commodity

(D) the market price of a commodity is inversely related to the size of the population
an overreaching inference -- can't be inferred

(E) whatever changes in supply occur, there will be compensating changes in consumer demand
changes in consumer demand and changes in supply are independent factors impacting the market price

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Re: 12 Days of Christmas GMAT Competition - Day 10: In an isolated economy [#permalink]
(B) if the population size remains constant, an increase in the supply of a commodity will lead to a decrease in its market price
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Re: 12 Days of Christmas GMAT Competition - Day 10: In an isolated economy [#permalink]
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(A) any increase in the market price of a commodity is the result of a decrease in its supply demand may also increase

(B) if the population size remains constant, an increase in the supply of a commodity will lead to a decrease in its market price correct

(C) if there is a decrease in the population size, then, other things being equal, the market price of commodities must increase demand decrease, supply unchanged, price must decrease

(D) the market price of a commodity is inversely related to the size of the population iff supply doesn't increase

(E) whatever changes in supply occur, there will be compensating changes in consumer demand not necessarily

Ans B
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Re: 12 Days of Christmas GMAT Competition - Day 10: In an isolated economy [#permalink]
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Bunuel wrote:
12 Days of Christmas 🎅 GMAT Competition with Lots of Questions & Fun

In an isolated economy, the only two factors that can directly affect the market price of a commodity are changes in its supply and changes in consumer demand. In such an economy, the total consumer demand is directly proportional to the population size.

If the statements above are true, then it is also true that in this isolated economy:

(A) any increase in the market price of a commodity is the result of a decrease in its supply

(B) if the population size remains constant, an increase in the supply of a commodity will lead to a decrease in its market price

(C) if there is a decrease in the population size, then, other things being equal, the market price of commodities must increase

(D) the market price of a commodity is inversely related to the size of the population

(E) whatever changes in supply occur, there will be compensating changes in consumer demand

 This question was provided by GMAT Club for the 12 Days of Christmas Competition Win \$25,000 in prizes: Courses, Tests & more

(A) any increase in the market price of a commodity is the result of a decrease in its supply

We can't conclude that 'any increase' is as a result of decrease in supply. The premise outlines two factors that control market price.

(B) if the population size remains constant, an increase in the supply of a commodity will lead to a decrease in its market price

As population size remains constant, there is no fluctuations in the demand. Hence, the only factor that can affect market price is supply. So this can be true.

(C) if there is a decrease in the population size, then, other things being equal, the market price of commodities must increase

We can't infer this. Eliminate.

(D) the market price of a commodity is inversely related to the size of the population

We can't infer this. The passage doesn't provide any details if the correlation is positive or negative. Eliminate.

(E) whatever changes in supply occur, there will be compensating changes in consumer demand

No such information is present in the passage.

IMO B
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Re: 12 Days of Christmas GMAT Competition - Day 10: In an isolated economy [#permalink]
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Kudos
In an isolated economy, the only two factors that can directly affect the market price of a commodity are changes in its supply and changes in consumer demand. In such an economy, the total consumer demand is directly proportional to the population size.

If the statements above are true, then it is also true that in this isolated economy:

(A) any increase in the market price of a commodity is the result of a decrease in its supply
Explanation: This isn't necessarily true. While a decrease in supply can lead to a price increase, it's not the only possibility. An increase in consumer demand can also cause a price hike. INCORRECT

(B) if the population size remains constant, an increase in the supply of a commodity will lead to a decrease in its market price
Explanation: This choice is likely true. If the population (and therefore total demand) remains constant, an increase in supply will exceed existing demand, putting downward pressure on the price. CORRECT

(C) if there is a decrease in the population size, then, other things being equal, the market price of commodities must increase
Explanation: Even though this option talks about keeping other factors equal, a decrease in population size means decrease in demand which will reduce the price of the commodities and not increase it. INCORRECT

(D) the market price of a commodity is inversely related to the size of the population
Explanation: This is not inherently true. While the total demand in this economy is directly proportional to the population, some commodities with niche demand might not always exhibit this trend. INCORRECT

(E) whatever changes in supply occur, there will be compensating changes in consumer demand
Explanation: This isn't guaranteed. While price adjustments may eventually lead to adjustments in demand, it's not automatic or immediate. INCORRECT

Option B is the right answer.
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Re: 12 Days of Christmas GMAT Competition - Day 10: In an isolated economy [#permalink]
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Kudos
Bunuel wrote:
12 Days of Christmas 🎅 GMAT Competition with Lots of Questions & Fun

In an isolated economy, the only two factors that can directly affect the market price of a commodity are changes in its supply and changes in consumer demand. In such an economy, the total consumer demand is directly proportional to the population size.

If the statements above are true, then it is also true that in this isolated economy:

(A) any increase in the market price of a commodity is the result of a decrease in its supply

(B) if the population size remains constant, an increase in the supply of a commodity will lead to a decrease in its market price

(C) if there is a decrease in the population size, then, other things being equal, the market price of commodities must increase

(D) the market price of a commodity is inversely related to the size of the population

(E) whatever changes in supply occur, there will be compensating changes in consumer demand

 This question was provided by GMAT Club for the 12 Days of Christmas Competition Win \$25,000 in prizes: Courses, Tests & more

(A) any increase in the market price of a commodity is the result of a decrease in its supply
-- this is not the only factor

(B) if the population size remains constant, an increase in the supply of a commodity will lead to a decrease in its market price
-- this is plausible

(C) if there is a decrease in the population size, then, other things being equal, the market price of commodities must increase
-- this would be inverse of what is mentioned in the argument

(D) the market price of a commodity is inversely related to the size of the population
-- this also depends on the supply factors too

(E) whatever changes in supply occur, there will be compensating changes in consumer demand
-- this cannot be inferred from the argument

Option B
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Re: 12 Days of Christmas GMAT Competition - Day 10: In an isolated economy [#permalink]
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(A) any increase in the market price of a commodity is the result of a decrease in its supply

This is not necessarily true. An increase in the market price could be caused by an increase in demand or a decrease in supply.
(B) if the population size remains constant, an increase in the supply of a commodity will lead to a decrease in its market price

This is consistent with the information given. If the population size is constant, an increase in supply could lead to a decrease in market price due to an excess in supply.
(C) if there is a decrease in the population size, then, other things being equal, the market price of commodities must increase

This is not necessarily true. The total consumer demand is directly proportional to the population size, but changes in supply could offset changes in demand.
(D) the market price of a commodity is inversely related to the size of the population

This is not supported by the given information. The total consumer demand is directly proportional to the population size.
(E) whatever changes in supply occur, there will be compensating changes in consumer demand

This is not necessarily true. The given information does not imply that changes in supply will always be compensated by changes in consumer demand.
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Re: 12 Days of Christmas GMAT Competition - Day 10: In an isolated economy [#permalink]
­So the argument says that commodity market prices are affected by 2 things: supply and demand. The demand is proportional to the population size.

It's important to say that GMAT requires test takers to know basic economic principles for some questions. In this case, you must know that if the supply of a good or service outstrips the demand for it, prices will fall. If demand exceeds supply, prices will rise.

A. any increase in the market price of a commodity is the result of a decrease in its supply
We cannot say that ANY increase in market price would be result of a decrease in its supply. It may be result of a increase in total demand > OUT

B. if the population size remains constant, an increase in the supply of a commodity will lead to a decrease in its market price
As the argument says that the commodity market prices are affected by ONLY 2 things, if we keep population size constant, in other words, the demand constant, then based on basic economic principles an increase in supply will lead to a decrease in its market price > KEEP

C. if there is a decrease in the population size, then, other things being equal, the market price of commodities must increase
If population size decreases, then demand would also decrease. But if supply stays equal, then market price would decrease (we would have lots of supply but low demand) > OUT

D. the market price of a commodity is inversely related to the size of the population
Let's think about it. If we have a larger population, we would have more demand and consequently prices would go up. So the market price is directly related to population size > OUT

E. whatever changes in supply occur, there will be compensating changes in consumer demand
Not necessarily. Nothing in the passage supports that one factor would compensate the other. We can have a scenario as option B, in which supply increases but demand remains constant > OUT