Escalating worldwide demand for corn has led to a sharp

Another trap by the GMAT in which a lot of takers (including me) fall into.

Conclusion says "IMMEDIATE short-term decrease" ... so an answer choice could be true but it doesn't address the "IMMEDIATE" short-term decrease

This is the reason why D is wrong. Because when you say "again" you are talking about a long term kind of thing.

If you look at B, it address something IMMEDIATE.

Good job GMAC

Kudos please?

Escalating worldwide demand for corn has led to a sharp increase in the market price of corn, and corn prices are likely to remain high. Corn is extensive used as feed for
livestock, and because profit margins are tight in the livestock business, many farmers are expected to leave the business. With fewer suppliers, meat prices will surely rise. Nonetheless, observers expect an immediate short-term decrease in meat prices.

There is something that causes a short-term decrease in meat prices in spite of increase in corn prices.

Which of the following, if true, most helps to justify the observers’ expectation?

A. The increase in corn prices is due more to a decline in the supply of corn than to a growth in demand for it. - irrelevant
B. Generally, farmers who are squeezed out of the livestock business send their livestock to market much earlier than they otherwise would. - straightforward point to unambiguous short-term decrease in meat prices
C. Some people who ate meat regularly in the past are converting to diets that include little or no meat.- irrelevant. It does not explain a short-term phenomena.
D. As meat prices rise, the number of livestock producers is likely to rise again. - irrelevant. It explains a short-term increase in meat prices with following decrease.
E. Livestock producers who stay in the business will start using feed other than corn more extensively than they did in the past.- irrelevant. It may vague explain a short-term increase in meat prices or a long-term decrease.

B is clear for me. Only B explains s short-term decrease unambiguously.

We shoudl find a reason for the observers expectation that their would be a decrese in meat price.

A. The increase in corn prices is due more to a decline in the supply of corn than to a growth in demand for it.(Corn is not observers are talking about)
B. Generally, farmers who are squeezed out of the livestock business send their livestock to market much earlier than they otherwise would.(Could be. b'coz if the farmers send their livestock early to the market, their would be more supply which will cause the decrese in prices)
C. Some people who ate meat regularly in the past are converting to diets that include little or no meat.(Out of scope)
D. As meat prices rise, the number of livestock producers is likely to rise again.([color=#BF00800]Observer is talking about price decrese[/color])
E. Livestock producers who stay in the business will start using feed other than corn more extensively than they did in the past.(The farmers investment on the livestock will increase or decrese. V dont know if the feeder being used it expensive than corn or not)


So, will go for B

OA?

Here is my take - hope this helps!

Conclusion: Observers expect an immediate short-term decrease in meat prices.
Argument: Corn is extensive feed for livestock and because profit margins are tight in the livestock business, many farmers leaving the Corn business.

A. The increase in corn prices is due more to a decline in the supply of corn than to a growth in demand for it. [The argument is concerned about immediate decline in livestock price – nothing to do with corn prices decline – eliminate it]

B. Generally, farmers who are squeezed out of the livestock business send their livestock to market much earlier than they otherwise would. (Hold it)

C. Some people who ate meat regularly in the past are converting to diets that include little or no meat.[Nothing discussed about dietary habits in the passage – eliminate it]

D. As meat prices rise, the number of livestock producers is likely to rise again.[Nothing addressing the short-term decline – eliminate it]

E. Livestock producers who stay in the business will start using feed other than corn more extensively than they did in the past.[This is also no specified as part of the argument – eliminate it]

Answer: B

WAs a close call btw B and D.

The word short term decrease made me choose B.

B it is. The rest of answer choices does not explain why the meat prices might decrease.

I am unable to understand this question. Can you please elaborate this demand-supply problem?
My Premises:
1. Corn Demand Increase
--leads to --> Corn Prise Increase
2. Farmers leave Corn Business, because a) Corn will be used as a livestock b) Margins are tight in livestock. (I am not clear in this )
--leads to --> Fewer suppliers of Corn?
Questions:
#1. Farmers leave livestock business OR Corn business ?
#2. As margins in livestock are tight. They leave livestock business and join Corn business. Is it correct ?
#3. If farmers join Corn business after leaving livestock business, Price of meat should increase.

Conclusion:
Immediate short-term decrease in meat prices.
#4. I tempted to chose E, but its wrong.

Hi,

Good observation. However, I think that this question does require some outside knowledge, since nowhere in the passage is it mentioned that more supply of meat would yield lower prices of meat... don´t you agree?

Since I am very limited on Economy, can I ask you if the following statements are mostly true:
- If Demand increases and Supply remains equal, then Price increases
- If Demand decreases and Supply remains equal, then Price decreases
- If Supply increases and Demand remains equal, then Price decreases
- If Supply decreases and Demand remains equal, then Price increases.

Thank you so much!

Hi,

GMAT is not formal logic and thus, require use of common sense knowledge.

This post gives even more examples where GMAT requires common sense: https://gmatclub.com/forum/as-a-construc ... l#p1218565

Also, all of your observations about economics are correct. Price is directly related to demand and inversely related to supply.

Thanks,
Chiranjeev

Hi chiranjeev12,
Thanks for the taking the time to read my post and answer my (very basic!) questions about Economy.
+1 for you

Hi Chirankeev,

One more question if you don´t mind. I know I am kind of going off topic here but... you stated that "Price is directly related to demand and inversely related to supply". You used the words "directly related" and "indirectly related", meaning that even though these relationships exist, they are not actually "directly proportional" or "inversely proportional". In other words, we cannot state that "Price = k * Demand" or that "Price = k / Supply", correct?

I´ve seen in your profile that your concentration is in Economics/Finance so I thought you maybe wouldn´t mind answering this simple question.

Thank you so much!

The fundamental concept in Economics is if demand is more and supply is less, the price rises and vice versa. "B" implies that if the livestock are sent early, supply is more and demand is not commensurate with that - hence the price falls.
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Can someone explain to me how B is straight forward and to the point? If anything, C would obviously mean that there would be less demand would mean that they would have to lower prices in order to make meat more attractive. I'm not sure what B is even trying to say. Should it say "Generally farmers WHO WOULD BE squeezed out of the livestock business, WILL send their.."

I totally agree. C means that the price will decrease as the demand goes down. yes pls explain why c is wrong?

explain question, like inference question, dose not require us to criticize the argument. I think there are only two type of questions on CR, one requiring criticization and one not requiring.

it is hard to choose between B and C. C is incorrect because it is not certain that at the relevant time they convert to vegetable diets.

Observer's expectation :- an immediate short-term decrease in meat prices.

Option D does not give a reason why an immediateshort term decrease in meat prices will happen.

Option D says "As meat prices rise, the number of livestock producers is likely to rise again." ..."is likely to " makes it a possibility which can happen in future. So the decrease in meat prices will not happen immediately. That's why option D does not justify the observer's expectation and hence incorrect.

VeritasKarishma GMATNinja chetan2u generis Is my explanation correct as to why option D is wrong ...

sayan640 your analysis is good.

You are correct that the right answer must explain this immediate short-term price decrease that the observers expect.

How is it possible that meat prices "will surely rise" but also will "decrease" in the "immediate short term"?
Option D does not explain the contradiction.

What do possibly increased numbers of livestock farmers have to do with this immediate short-term price decrease?
Nothing. Absolutely nothing. The price of meat will get higher. Livestock farmers may respond at some point by increasing in numbers again.

(No one needs to think about this part, but prices may stay high even if, in response to high prices, the number of livestock farmers increases. Prices are inelastic downwards. Once prices get high, they tend not to come back down, although in foodstuffs, prices are a little more flexible.)

From what source is this expected immediate short-term price decrease coming?
From these theoretically possible farmers who respond in the future to increased prices?

We have no idea whether more farmers will join the livestock market. It's "likely," not certain. How likely?
We have no idea when those farmers might join the market.
As you state, the word "likely" suggests "a possibility in the future."

Other words in D support your good instincts.
As meat prices rise, the number of livestock producers is likely to rise again
As meat prices rise does not suggest, let alone explain, an immediate short-term price drop.
And if the number of livestock producers is likely to rise again, then the expectation stated in the prompt is reinforced: "many farmers are expected to leave the business."

This answer reinforces the paradox.

If we have many fewer farmers producing meat right now or soon, and less meat equals higher prices, why do observers expect an immediate short-term decrease in price?
Are the observers relying on this piece of information to make that forecast? No.

We need another piece of evidence to explain the paradox, and this option is not that evidence.

Only answer B mentions a time frame that has anything to do with the near-term (immediate) future.

Option D is not certain, not applicable to the immediate short term, and not helpful.

sayan640 , nicely done.
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The paradox is regarding meat prices and not corn.
Rising corn prices only explain why farmers will go out of business. If farmers go out of business, supply of meat will supposedly reduce and hence its price is expected to increase.
What will cause an immediate short term reduction in meat prices?

(A) The increase in corn prices is due more to a decline in the supply of corn than to a growth in demand for it.

Irrelevant. We need explanation about meat prices.

(B) Generally, farmers who are squeezed out of the livestock business send their livestock to market much earlier than they otherwise would.

Correct. Because farmers going out of business will sell off their inventory early, supply will rise in immediate short term and will lead to lower prices.

(C) Some people who ate meat regularly in the past are converting to diets that include little or no meat.

Some people are converting to meatless diets might have some impact in long term. We need something that explains immediate short term.

(D) As meat prices rise, the number of livestock producers is likely to rise again.

It is possible that number of livestock producers will rise again but that is a long term thing. First, farmers will be squeezed out of business, prices will rise, people will see higher profit margins, more people will get in the business. We want to see what will reduce prices in immediate short term (before the price increase in meat prices happens because farmers are squeezed out of business)

(E) Livestock producers who stay in the business will start using feed other than corn more extensively than they did in the past.

What people who stay in business will do is irrelevant.

Answer(B)
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