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In economics, a "Veblen good" is an item which people buy in greater

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In economics, a "Veblen good" is an item which people buy in greater  [#permalink]

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New post Updated on: 28 Jun 2018, 01:38
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In economics, a "Veblen good" is an item which people buy in greater quantity when the price goes up. According to the Law of Supply and Demand, when the price of an ordinary item goes up, demand drops, i.e. people buy fewer of them. A Veblen good is a luxury item to which status is attached, such as a designer outfit or luxury car. As the price of such an item increases, its prestige increases, which makes the item that much more desirable. Therefore, as the price increases, the demand also increases, and more of these items are sold.

In the argument, the two portions in boldface play which of the following roles?

A. This first is a piece of evidence supporting the main conclusion; the second is the main conclusion.
B. The first is a view that the author opposes; the second is the main conclusion.
C. The first is a prediction; the second gives evidence of for this prediction.
D. The first is a general rule, the violation of which seems to indicate a paradox; the second is the resolution of that apparent paradox.
E. The first is an ironic description of what could happen in the marketplace; the second is a more realistic description of what actually happens.

Originally posted by guerrero25 on 26 Jan 2014, 10:27.
Last edited by Bunuel on 28 Jun 2018, 01:38, edited 2 times in total.
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Re: In economics, a "Veblen good" is an item which people buy in greater  [#permalink]

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New post 26 Jan 2014, 10:53
2
IMO D

1st bold: A general rule
2nd bold: Paradox of the rule

A ) This first is a piece of evidence supporting the main conclusion; the second is the main conclusion. Incorrect- 1st bold is not an evidence
B) The first is a view that the author opposes; the second is the main conclusion. Incorrect- No indication of author opposing the view or 1st bold.
C)The first is a prediction; the second gives evidence of for this prediction. Incorrect- 1st bold is not a prediction.
D)The first is a general rule, the violation of which seems to indicate a paradox; the second is the resolution of that apparent paradox. Correct- matches our prediction i.e. 1st bold is a general rule while 2nd bold is resolution of the paradox stated by author in the stem
E)The first is an ironic description of what could happen in the marketplace; the second is a more realistic description of what actually happens. Incorrect- 1st bold is not an ironic description but a general rule i.e. a law

Again a good question. You seem to have a good repository of GMAT verbal :-).

Please post OA along with OE if possible. Would like to understand better.
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Re: In economics, a "Veblen good" is an item which people buy in greater  [#permalink]

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New post 26 Jan 2014, 13:19
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guerrero25 wrote:
In economics, a "Veblen good" is an item which people buy in greater quantity when the price goes up. According to the Law of Supply and Demand, when the price of an ordinary item goes up, demand drops, i.e. people buy fewer of them. A Veblen good is a luxury item to which status is attached, such as a designer outfit or luxury car. As the price of such an item increases, its prestige increases, which makes the item that much more desirable. Therefore, as the price increases, the demand also increases, and more of these items are sold.

In the argument, the two portions in boldface play which of the following roles?

A ) This first is a piece of evidence supporting the main conclusion; the second is the main conclusion.
B) The first is a view that the author opposes; the second is the main conclusion.
C)The first is a prediction; the second gives evidence of for this prediction.
D)The first is a general rule, the violation of which seems to indicate a paradox; the second is the resolution of that apparent paradox.
E)The first is an ironic description of what could happen in the marketplace; the second is a more realistic description of what actually happens.


OA to follow soon



In economics, a "Veblen good" is an item which people buy in greater quantity when the price goes up. -> Fact 1

According to the Law of Supply and Demand, when the price of an ordinary item goes up, demand drops, i.e. people buy fewer of them. - Fact 2 (Also counters Fact 1)

A Veblen good is a luxury item to which status is attached, such as a designer outfit or luxury car. - Fact 3

As the price of such an item increases, its prestige increases, which makes the item that much more desirable. - Fact 4 (Explains Fact 1 and forms the basis for conclusion i.e. BF 2)

Therefore, as the price increases, the demand also increases, and more of these items are sold.
- Conclusion


IMO -D
OA ? Source?
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Re: In economics, a "Veblen good" is an item which people buy in greater  [#permalink]

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New post 05 Mar 2016, 15:57
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guerrero25 wrote:
In economics, a "Veblen good" is an item which people buy in greater quantity when the price goes up. According to the Law of Supply and Demand, when the price of an ordinary item goes up, demand drops, i.e. people buy fewer of them. A Veblen good is a luxury item to which status is attached, such as a designer outfit or luxury car. As the price of such an item increases, its prestige increases, which makes the item that much more desirable. Therefore, as the price increases, the demand also increases, and more of these items are sold.

In the argument, the two portions in boldface play which of the following roles?

A ) This first is a piece of evidence supporting the main conclusion; the second is the main conclusion.
B) The first is a view that the author opposes; the second is the main conclusion.
C)The first is a prediction; the second gives evidence of for this prediction.
D)The first is a general rule, the violation of which seems to indicate a paradox; the second is the resolution of that apparent paradox.
E)The first is an ironic description of what could happen in the marketplace; the second is a more realistic description of what actually happens.


OA to follow soon


first is a law..so must be considered as data point/rule/fact
second -> an exception of that rule. and is written as a conclusion.

A - the two statements contradict each other. so out
B - it's not a view..it's a rule/law/fact
C - the first is not a prediction
D = yes, first is a general rule. if it doesn't follow the rule - then we have a paradox. the second is a conclusion -> why this paradox exist.
E - the first is not a description. it's a fact.
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Re: In economics, a "Veblen good" is an item which people buy in greater  [#permalink]

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New post 08 Aug 2018, 16:43

Official Explanation


The first bold statement is the Law of Supply and Demand, one of the most fundamental and far-reaching laws in all of economics. A Veblen good is a rare example of a commodity that does not follow the Law of Supply and Demand in an ordinary way. The second bold statement makes this clear: the Veblen goods are following a pattern different from the standard application of the Law of Supply and Demand.

Notice that the two bold statements are odd with each other: on the surface, there's a contradiction, and we need the complete text of the argument to resolve this contradiction.

(D) is the credited answer. The first statement, the Law of Supply and Demand, is differently a general rule, a widely observed pattern in markets throughout the world. The Veblen good doesn't obey this rule, so that's paradoxical. The sentences between the bold statements explain what is unique to the economy of a Veblen good, and the final sentence completes that explanation ---- i.e. it resolves the apparent paradox.

(A) is wrong. First of all, the Law of Supply and Demand is not really a piece of evidence. Furthermore, there's a contradiction between this law and how a Veblen good works, so the first bold statement does not support the second.

(B) is wrong. No author in her right mind would oppose the Law of Supply and Demand.

(C) is wrong. First of all, the Law of Supply and Demand is not merely a prediction. Furthermore, there's a contradiction between the two bold statements; one is not evidence for the other.

(E) is wrong. There is absolutely nothing ironic and nothing hypothetical about the fundamental statement of the Law of Supply and Demand --- it's purely factual and objective. Furthermore, the second statement, about Veblen goods, describes a small category of specialty items, and does not apply to the market in general.
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Re: In economics, a "Veblen good" is an item which people buy in greater  [#permalink]

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New post 30 Aug 2018, 17:56
But in choice B if you consider only the 2nd part of the answer , It is the conclusion of the argument right?
I thought as such because the conclusion marker 'Therefore'.
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Re: In economics, a "Veblen good" is an item which people buy in greater  [#permalink]

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New post 14 Sep 2018, 01:45
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longhaul123 wrote:
But in choice B if you consider only the 2nd part of the answer , It is the conclusion of the argument right?
I thought as such because the conclusion marker 'Therefore'.


Hi anyone,

Similar to what longhaul123 has pointed out, I went by eliminating C, D, E as the second bold part didn't feel like a resolution. The sentence before the second bold part seems like a resolution and the second bold part itself is the conclusion after the resolution. Finally chose B, without noticing the first part of B. Choosing the best option after reading each is giving me a hard time. The more I read about options, the more confusing becomes the easiest of the questions.

Thanks :)
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Re: In economics, a "Veblen good" is an item which people buy in greater  [#permalink]

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New post 14 Sep 2018, 03:52
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akshaykotha - for a sec you should consider it a paradox question. Think what is the paradox here and resolution is also given as the main conclusion of the problem. Let me know if you are able to connect the dots. if not let me know, i will try to explain it to you.
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Re: In economics, a "Veblen good" is an item which people buy in greater  [#permalink]

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New post 15 Sep 2018, 06:43
aragonn wrote:
akshaykotha - for a sec you should consider it a paradox question. Think what is the paradox here and resolution is also given as the main conclusion of the problem. Let me know if you are able to connect the dots. if not let me know, i will try to explain it to you.


Hey aragonn,

Thanks for responding. According to what I comprehend, paradox here is: Veblen good not following the well-established law. Resolution: As the price increases, prestige increases. Would like to know your thoughts.
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Re: In economics, a "Veblen good" is an item which people buy in greater  [#permalink]

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New post 15 Sep 2018, 07:04
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akshaykotha

Yes, Correct on identifying the paradox, but don't you think you are economical on the resolution. yes prestige increased but what about the price. as 2nd part of the BF is talking about price too.

On the ground of resolution - What is resolving the paradox? In one sentence(may be more) you have to identify, how to resolve two given things/situations (Usually two situations are given in gmat, more can also be possible.) In other words, that part should be explaining whole thing correctly. Lets take the example of this one.

situation 1 - when the price of an ordinary item goes up, demand drops, i.e. people buy fewer of them.
situation 2 - As the price of such an item increases, its prestige increases, which makes the item that much more desirable.

Paradox - Why one type of item is desirable and not the other type. ---- Now tell me is below given conclusion explains the paradox ? In case your answer is no, it's not explaining. Please let me know what else should be added to it to make it full explanation.

Conclusion - Therefore, as the price increases, the demand also increases, and more of these items are sold.

Hope it was helpful. If any doubts, don't hesitate to respond.
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Re: In economics, a "Veblen good" is an item which people buy in greater  [#permalink]

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New post 15 Sep 2018, 08:58
Hi aragonn,

After some brainstorming, I get that the sentence before the conclusion doesn't explicitly state that if price increases, demand increases. It is just limited to telling the reader that the product becomes more desirable. Hence, the conclusion is resolving the paradox: Why Veblen good doesn't follow the law. This discussion is a realization and re-emphasis of limiting the 'scope' (with the help of comprehension) of the statements made in a typical GMAT question.
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Re: In economics, a "Veblen good" is an item which people buy in greater &nbs [#permalink] 15 Sep 2018, 08:58
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