Check GMAT Club Decision Tracker for the Latest School Decision Releases https://gmatclub.com/AppTrack
GMAT Club

 It is currently 27 Mar 2017, 19:50

### GMAT Club Daily Prep

#### Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.

Customized
for You

we will pick new questions that match your level based on your Timer History

Track

every week, we’ll send you an estimated GMAT score based on your performance

Practice
Pays

we will pick new questions that match your level based on your Timer History

# Events & Promotions

###### Events & Promotions in June
Open Detailed Calendar

# Economist: The law of demand predicts that as the price of a

Author Message
TAGS:

### Hide Tags

Manager
Joined: 16 Jun 2010
Posts: 171
Followers: 3

Kudos [?]: 45 [1] , given: 1

Economist: The law of demand predicts that as the price of a [#permalink]

### Show Tags

28 Jul 2010, 00:26
1
KUDOS
1
This post was
BOOKMARKED
00:00

Difficulty:

(N/A)

Question Stats:

57% (02:17) correct 43% (01:23) wrong based on 36 sessions

### HideShow timer Statistics

Economist: The law of demand predicts that as the price of a good goes down, demand for that good will increase, and vice-versa. In a recent experiment, economists gave coupons for rice to families in a province of China, where it is a staple food. The coupons effectively lowered the cost of rice, and should have led the families to buy more of it. Instead, households given the coupons purchased less rice than a control group who did not receive coupons.

Which of the following, if true, most helps to explain the amount of rice purchased by families who received coupons?
(A) Chinese families spend an unusually high proportion of their income on rice.
(B) The prices of staple goods, including foodstuffs such as rice, do not fluctuate as much as those of non-necessary goods, such as consumer electronics.
(C) In the months before and after the experiment, the average per-family consumption of rice in the Chinese province steadily decreased.
(D) Many of the families given coupons discovered that they could sell the coupons on the black market.
(E) The availability of the coupons meant that families had more money to spend on other things, including more expensive substitutes for rice.

OA Later
_________________

R E S P E C T

Finally KISSedGMAT 700 times 450 to 700 An exprience

If you have any questions
New!
 Economist GMAT Tutor Discount Codes Veritas Prep GMAT Discount Codes e-GMAT Discount Codes
Director
Status: Impossible is not a fact. It's an opinion. It's a dare. Impossible is nothing.
Affiliations: University of Chicago Booth School of Business
Joined: 26 Nov 2009
Posts: 993
Location: Singapore
Followers: 23

Kudos [?]: 780 [0], given: 36

### Show Tags

28 Jul 2010, 00:42
P1 : When the price of a good goes down, demand for that good will increase
P2 : Price of rice went down but the demand also decreased

Between D and E

D : does not explains why the demand of rice will go down. demand of rice should have gone up if the coupons are sold in black market.

E : Yes this explains why the demand of rice went down and resolves the discrepancy. Answer.
_________________

Please press kudos if you like my post.

Manager
Joined: 24 Dec 2009
Posts: 224
Followers: 2

Kudos [?]: 41 [0], given: 3

### Show Tags

28 Jul 2010, 12:46
E for me too. OA please. Thank You.

Thanks,
Akhil M.Parekh
SVP
Joined: 17 Feb 2010
Posts: 1549
Followers: 19

Kudos [?]: 610 [0], given: 6

### Show Tags

28 Jul 2010, 13:50
I narrowed to B, D and E.

D is out because families discovered that that can sell coupons in black market. We dont know if thye actually did that.

B is out because if the price of rice does not fluctuate as much as other goods than why 1 group demanded more rice and the other demanded less.

E is correct as it explains that people who had coupons used it for expensive substitiutes of rice thereby decreasing the demand for rice.
Intern
Joined: 09 Jun 2010
Posts: 2
Location: United States
Concentration: Operations, Strategy
GMAT 1: 700 Q49 V35
GPA: 3.2
WE: Engineering (Computer Software)
Followers: 0

Kudos [?]: 5 [0], given: 0

### Show Tags

28 Jul 2010, 16:03
i will go with 'D' ,
E - Coupons can only be used for rice, people have to purchase rice to save money and thn only can spend the remaining on others. I don;t think in this case rice consumption decreases.
Manager
Joined: 11 May 2010
Posts: 221
Followers: 4

Kudos [?]: 123 [0], given: 11

### Show Tags

28 Jul 2010, 20:16
jainrahul1234 wrote:
i will go with 'D' ,
E - Coupons can only be used for rice, people have to purchase rice to save money and thn only can spend the remaining on others. I don;t think in this case rice consumption decreases.

I pick E

Say you usually spend $10 to buy 10kg rice. Now with the coupon, you can spend$2 to buy 5kg rice and \$8 to buy 5kg Kimchi (assume Kimchi is more desirable than Rice) for example.
Manager
Joined: 29 Oct 2009
Posts: 66
Followers: 1

Kudos [?]: 2 [0], given: 3

### Show Tags

28 Jul 2010, 20:47
D for me too...
Manager
Joined: 16 Jun 2010
Posts: 171
Followers: 3

Kudos [?]: 45 [0], given: 1

### Show Tags

29 Jul 2010, 00:16
OA is E . I went for D .

nusmavrik has explained precisely.

P1 : When the price of a good goes down, demand for that good will increase
P2 : Price of rice went down but the demand also decreased

Between D and E

D : does not explains why the demand of rice will go down. demand of rice should have gone up if the coupons are sold in black market.

E : Yes this explains why the demand of rice went down and resolves the discrepancy. Answer.

Thx GUys !
_________________

R E S P E C T

Finally KISSedGMAT 700 times 450 to 700 An exprience

Manager
Joined: 27 Jun 2008
Posts: 85
Location: United States (AL)
Concentration: General Management, Technology
GMAT 1: 660 Q48 V34
WE: Consulting (Computer Software)
Followers: 1

Kudos [?]: 15 [0], given: 22

### Show Tags

29 Jul 2010, 03:25
E for me too,, good explanation by nusmavrik
Manager
Joined: 11 Feb 2008
Posts: 89
Followers: 1

Kudos [?]: 31 [0], given: 2

### Show Tags

29 Jul 2010, 03:27
good Q
also went for D first time
_________________

-------------------------------------------------------------------------------------------
Amar
http://amarnaik.wordpress.com

VP
Status: There is always something new !!
Affiliations: PMI,QAI Global,eXampleCG
Joined: 08 May 2009
Posts: 1346
Followers: 17

Kudos [?]: 250 [0], given: 10

### Show Tags

13 Jun 2011, 02:55
E precisely gives the reason why the people purchased less rice.
E it is.
_________________

Visit -- http://www.sustainable-sphere.com/
Promote Green Business,Sustainable Living and Green Earth !!

Manager
Joined: 17 Feb 2011
Posts: 112
Followers: 1

Kudos [?]: 5 [0], given: 25

### Show Tags

08 Sep 2011, 05:13
We are given higher price, decrease demand.

I don't understand how the reverse can be assumed. => decrease in price would increase in the demand??
Manager
Joined: 09 Jun 2011
Posts: 145
Followers: 0

Kudos [?]: 30 [0], given: 1

### Show Tags

08 Sep 2011, 10:07
This is a classic case where the question makes you think everything in D is good. And you mark D without paying much attention to E.

E for me too..

Schandok..I have learnt one in the GMAT questions that you should not apply your common outside knowledge.Go as per what is given in the questions..If you read carefully, the word 'vice-versa' is mentioned in the stimulus..Hence, you are not assuming anything here..Everything is given..and go as per that..
Manager
Joined: 01 Jun 2011
Posts: 175
Followers: 1

Kudos [?]: 17 [0], given: 6

### Show Tags

08 Sep 2011, 11:42
KissGMAT wrote:
Economist: The law of demand predicts that as the price of a good goes down, demand for that good will increase, and vice-versa. In a recent experiment, economists gave coupons for rice to families in a province of China, where it is a staple food. The coupons effectively lowered the cost of rice, and should have led the families to buy more of it. Instead, households given the coupons purchased less rice than a control group who did not receive coupons.

Which of the following, if true, most helps to explain the amount of rice purchased by families who received coupons?
(A) Chinese families spend an unusually high proportion of their income on rice.
(B) The prices of staple goods, including foodstuffs such as rice, do not fluctuate as much as those of non-necessary goods, such as consumer electronics.
(C) In the months before and after the experiment, the average per-family consumption of rice in the Chinese province steadily decreased.
(D) Many of the families given coupons discovered that they could sell the coupons on the black market.
(E) The availability of the coupons meant that families had more money to spend on other things, including more expensive substitutes for rice.

OA Later

(E) The availability of the coupons meant that families had more money to spend on other things, including more expensive substitutes for rice.
Manager
Joined: 17 Feb 2011
Posts: 112
Followers: 1

Kudos [?]: 5 [0], given: 25

### Show Tags

08 Sep 2011, 18:01
Thanks @OptimusPrimea1. Now it makes sense to me. +1 for E. I did missed vice-versa. Need to increase my concentration.
Manager
Status: Retaking next month
Affiliations: None
Joined: 05 Mar 2011
Posts: 226
Location: India
Concentration: Marketing, Entrepreneurship
GMAT 1: 570 Q42 V27
GPA: 3.01
WE: Sales (Manufacturing)
Followers: 5

Kudos [?]: 119 [0], given: 42

### Show Tags

20 Sep 2011, 21:05
schandok wrote:
Thanks @OptimusPrimea1. Now it makes sense to me. +1 for E. I did missed vice-versa. Need to increase my concentration.

Gr8 Question.

E for me.
Director
Status: 1,750 Q's attempted and counting
Affiliations: University of Florida
Joined: 09 Jul 2013
Posts: 512
Location: United States (FL)
Schools: UFL (A)
GMAT 1: 600 Q45 V29
GMAT 2: 590 Q35 V35
GMAT 3: 570 Q42 V28
GMAT 4: 610 Q44 V30
GPA: 3.45
WE: Accounting (Accounting)
Followers: 26

Kudos [?]: 783 [0], given: 630

Re: Economist: The law of demand predicts that as the price of a [#permalink]

### Show Tags

14 Oct 2013, 08:21
This appears to be a GMAT Hacks question of the day. It reappeared on 3/5/2013. The Official Explanation is as follows:

Answer: E This is an explanation question. The apparent paradox is that, while the price of rice effectively declined, rice consumption also declined. Consider each choice in turn, looking for a reason why this might occur: (A) This doesn't tell us anything about the effect of the coupons. (B) The amount of fluctuation is outside the scope; we're concerned with the effect of lowering the price of rice. (C) That the average consumption of rice declined is not important; the study described in the passage included a control group, to which the households given coupons were compared. (D) This choice suggests that some families did not purchase rice with their coupons; however, this doesn't explain why they would also purchase less rice. (E) This is correct. If these families had money to purchase preferable rice substitutes, they may have increased or kept constant their consumption of rice and rice substitutes, but shifted some of their consumption from rice to substitutes because of the coupons.
Re: Economist: The law of demand predicts that as the price of a   [#permalink] 14 Oct 2013, 08:21
Similar topics Replies Last post
Similar
Topics:
14 #Top150 CR: Brunhilda: Economists have predicted that our generation 10 20 Oct 2015, 22:50
7 The law of demand states that 6 05 Jun 2015, 03:15
165 Brunhilda: Economists have predicted that our generation 15 19 Jun 2013, 21:38
20 The law of demand states that, if all other factors remain 16 06 Aug 2012, 09:05
7 Contrary to earlier predictions, demand for sugarcane has 14 15 Jan 2008, 14:02
Display posts from previous: Sort by