Bunuel 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.
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.