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A law passed in Rockville three years ago allows a 30% tax credit to

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A law passed in Rockville three years ago allows a 30% tax credit to  [#permalink]

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A law passed in Rockville three years ago allows a 30% tax credit to consumers who purchase a newly constructed home. The tax credit was intended to stimulate the local economy by creating a higher demand for new houses and spurring the creation of jobs in construction and design. However, since the law was passed, the growth in sales of newly constructed homes has dropped each year, from 15% to 10% to 5%. Obviously, this law has had little or no effect on the sale of newly constructed homes.

Which of the following must be true if the above conclusion is to be properly drawn?


A. New house sales are directly tied to personal income.

B. New house sales cannot increase by more than 6% next year.

C. If the tax credit had been 50%, there would have been a larger increase in new house sales

D. Without the tax credit, new house sales would not have been significantly lower.

E. Tax credits for specific purchases are usually ineffective in influencing consumers to make those purchases.

Originally posted by bschool83 on 10 Jul 2011, 12:50.
Last edited by Bunuel on 24 May 2019, 00:59, edited 1 time in total.
Renamed the topic and edited the question.
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Re: A law passed in Rockville three years ago allows a 30% tax credit to  [#permalink]

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New post 13 Jul 2011, 07:21
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I say D. The author is assuming that without the tax credit, the sales would have been similar, not worse than the sales figure now.
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Re: A law passed in Rockville three years ago allows a 30% tax credit to  [#permalink]

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New post 14 Jul 2011, 00:53
Can some one please explain why E is incorrect?
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Re: A law passed in Rockville three years ago allows a 30% tax credit to  [#permalink]

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New post 20 Jul 2011, 22:43
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zuberahmed wrote:
Can some one please explain why E is incorrect?


E - Tax credits for specific purchases are usually ineffective in influencing consumers to make those purchases.
    If we negate, tax credits are usually effective in influencing consumers. It doesn't hurt the argument. Key word here is usually. In reality, it's neither here nor there (is that a GMAT SC-type correct idiom? I haven't gotten there yet hehe). Sure, tax credits are usually effective, but maybe here they are or are not.

D- Without the tax credit, new house sales would not have been significantly lower.
    If we negate, new house sales would be significantly lower without the tax credit. The argument breaks down and the law has an equally significant effect. Thus, this is the correct answer. It must be true if the above conclusion is to be properly drawn.

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Re: A law passed in Rockville three years ago allows a 30% tax credit to  [#permalink]

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New post 19 Oct 2012, 12:04
My way of thinking is the following -
I think that the question is actually an assumption type.
We have the conclusion - Obviously, this law has had little or no effect on the sale of newly constructed homes.

In assumption type of questions we need to find either contender or defender
Lets negate answ choice D -
Without the tax credit, new house sales would not have been significantly lower.
In this case the argument falls apart. I mean if the tax credit is not a reason of low sales, then the conclusion is erroneous

thats why D is ok
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Re: A law passed in Rockville three years ago allows a 30% tax credit to  [#permalink]

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New post 21 Sep 2016, 09:29
I did not follow the explanation provided. Can someone break it down please?
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Re: A law passed in Rockville three years ago allows a 30% tax credit to  [#permalink]

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New post 21 Sep 2016, 13:18
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warriorguy wrote:
I did not follow the explanation provided. Can someone break it down please?


Let's try -

Quote:
A law passed in Rockville three years ago allows a 30% tax credit to consumers who purchase a newly constructed home. The tax credit was intended to stimulate the local economy by creating a higher demand for new houses and spurring the creation of jobs in construction and design.


30% Tax credit for purchase of new House --------> Stimulating demand for new House ----> Creation of contract jobs.
|------------------------(A)------------------------------->-------------------(B)----------------------->-----------(C)----------------|

Quote:
However, since the law was passed, the growth in sales of newly constructed homes has dropped each year, from 15% to 10% to 5%. Obviously, this law has had little or no effect on the sale of newly constructed homes.


30% Tax credit for purchase of new House <--------- Demand for new House dropped
|------------------------(~A)---------------------------<-------------------(~B)----------------|


Check the negation logic used in the stimulus ( as depicted above) , hope this helps...

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Re: A law passed in Rockville three years ago allows a 30% tax credit to  [#permalink]

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New post 15 May 2017, 18:42
I chose option (D), but just had a question: this is an inference question, right?
From question stems, I think this is an inference question. But when looking at above comments, I saw many ppl say this is an assumption question. Could anyone shed some light?
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Re: A law passed in Rockville three years ago allows a 30% tax credit to  [#permalink]

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New post 27 May 2017, 10:52
Hello expert, could you please explain why option 'e' is wrong?
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Re: A law passed in Rockville three years ago allows a 30% tax credit to  [#permalink]

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New post 02 Jun 2017, 14:53
VKat wrote:
Hello expert, could you please explain why option 'e' is wrong?

Quote:
(E) Tax credits for specific purchases are usually ineffective in influencing consumers to make those purchases.

The question asks, "Which of the following must be true if the above conclusion is to be properly drawn?" The conclusion is that the tax credit has had little or no effect on the sale of newly constructed homes. It doesn't matter whether tax credits are usually ineffective. If, on the other hand, tax credits are usually effective but do not influence consumers to purchase homes, the conclusion can still be properly drawn.
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Re: A law passed in Rockville three years ago allows a 30% tax credit to  [#permalink]

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New post 22 May 2018, 12:29
But conclusion says: Obviously, this law has had little or no effect on the sale of newly constructed homes. So, presence or absence of the law doesn't matter. Then why absence of the law would yield positive result i.e sales wouldn't drop significantly? According to D presence or absence of the law DOES matter that presence of the law generates negative consequence. What I am missing here? GMATNinja, your help would be much appreciated.
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Re: A law passed in Rockville three years ago allows a 30% tax credit to  [#permalink]

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New post 31 May 2018, 07:24
GMATninja can you please help how to eliminate E?
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Re: A law passed in Rockville three years ago allows a 30% tax credit to  [#permalink]

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New post 31 May 2018, 08:05
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Only option D 'Without the tax credit, new house sales would not have been significantly lower' eliminates the weakness (the alternate explanation for the decrease in sales) in the argument and thus it must be true in order to draw the conclusion that 'law has had little or no effect on the sale of newly constructed homes'.
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Re: A law passed in Rockville three years ago allows a 30% tax credit to  [#permalink]

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New post 01 Jun 2018, 22:21
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swathiallumalla wrote:
GMATninja can you please help how to eliminate E?

Quote:
E. Tax credits for specific purchases are usually ineffective in influencing consumers to make those purchases.

We don't care about what tax credits USUALLY do to consumers. We only care about whether this tax credit helped or hurt new home sales.

Even if tax credits are usually effective, the author would claim that they were not effective in this case, citing the decline in growth. The author's argument does not rely on (E), so it can be eliminated.

Mehemmed wrote:
But conclusion says: Obviously, this law has had little or no effect on the sale of newly constructed homes. So, presence or absence of the law doesn't matter. Then why absence of the law would yield positive result i.e sales wouldn't drop significantly? According to D presence or absence of the law DOES matter that presence of the law generates negative consequence. What I am missing here? GMATNinja, your help would be much appreciated.

We are told that "since the law was passed, the growth in sales of newly constructed homes has dropped each year, from 15% to 10% to 5%." According to the author, this is evidence that "the law has had little or no effect on the sale of newly constructed homes."

Now imagine if the law had not been passed. In that case, what if growth in sales of new homes was significantly lower? What if growth, in that case, went from 15% to 5% to 1%? Maybe without the law, sales of newly constructed homes would have even DECREASED (i.e. 15% to 0% to -15%).

Even though growth decreased each year, the law may have prevented new home sales from plummeting. If (D) were not true, then new house sales would have been significantly lower without the law, and the numbers would have been much worse than 15%-10%-5%. That would imply that the law DID have a significant effect.
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Re: A law passed in Rockville three years ago allows a 30% tax credit to  [#permalink]

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New post 04 Aug 2018, 03:11
Quote:
A law passed in Rockville three years ago allows a 30% tax credit to consumers who purchase a newly constructed home. The tax credit was intended to stimulate the local economy by creating a higher demand for new houses and spurring the creation of jobs in construction and design. However, since the law was passed, the growth in sales of newly constructed homes has dropped each year, from 15% to 10% to 5%. Obviously, this law has had little or no effect on the sale of newly constructed homes.

This is a Cause and Effect case
The argument says "law" is not the cause for the effect "drop in sale of newly constructed homes"

So if we can further provides support for this relation, that will the answer.

Quote:
D. Without the tax credit, new house sales would not have been significantly lower.

This means even if the "law" was not there, the effect "drop in sales" would have been still there.
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Re: A law passed in Rockville three years ago allows a 30% tax credit to  [#permalink]

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New post 07 Aug 2018, 10:19
zuberahmed wrote:
Can some one please explain why E is incorrect?



because it picks up an instance and generalizes it, which is not acceptable
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Re: A law passed in Rockville three years ago allows a 30% tax credit to  [#permalink]

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Re: A law passed in Rockville three years ago allows a 30% tax credit to   [#permalink] 24 May 2019, 00:58
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