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# In January there was a large drop in the number of new

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VP
Joined: 21 Aug 2006
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In January there was a large drop in the number of new [#permalink]

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23 Nov 2006, 08:58
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In January there was a large drop in the number of new houses sold, because interest rates for mortgages were falling and many consumers were waiting to see how low the rates would go. This large sales drop was accompanied by a sharp rise in the average price of new houses sold.
Which of the following, if true, best explains the sharp rise in the average price of new houses?
(A) Sales of higher-priced houses were unaffected by the sales drop because their purchasers have fewer constraints limiting the total amount they pay.
(B) Labor agreements of builders with construction unions are not due to expire until the next January.
(C) The prices of new houses have been rising slowly over the past three years because there is an increasing shortage of housing.
(D) There was a greater amount of moderate-priced housing available for resale by owners during January than in the preceding three months.
(E) Interest rates for home mortgages are expected to rise sharply later in the year if predictions of increased business activity in general prove to be accurate.
_________________

The path is long, but self-surrender makes it short;
the way is difficult, but perfect trust makes it easy.

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VP
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Schools: Wharton (R2 - submitted); HBS (R2 - submitted); IIMA (admitted for 1 year PGPX)
Re: CR: New Houses [#permalink]

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23 Nov 2006, 09:14
ak_idc wrote:
In January there was a large drop in the number of new houses sold, because interest rates for mortgages were falling and many consumers were waiting to see how low the rates would go. This large sales drop was accompanied by a sharp rise in the average price of new houses sold.
Which of the following, if true, best explains the sharp rise in the average price of new houses?
(A) Sales of higher-priced houses were unaffected by the sales drop because their purchasers have fewer constraints limiting the total amount they pay.
(B) Labor agreements of builders with construction unions are not due to expire until the next January.
(C) The prices of new houses have been rising slowly over the past three years because there is an increasing shortage of housing.
(D) There was a greater amount of moderate-priced housing available for resale by owners during January than in the preceding three months.
(E) Interest rates for home mortgages are expected to rise sharply later in the year if predictions of increased business activity in general prove to be accurate.

A is it..

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Director
Joined: 28 Dec 2005
Posts: 917

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23 Nov 2006, 17:03
I would go with A also.

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Senior Manager
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23 Nov 2006, 17:26
A it is ...

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VP
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23 Nov 2006, 19:58
surely A

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VP
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23 Nov 2006, 21:17
Premise: The number of new houses sold reduced.
Premise: The average price of new houses sold increased

average = Total / number

Average can only increase when
-Total is constant and number decreases or
-Total is increasing and number is constant or
-Total is increasing and number is decreasing

A states the third point mentioned above
-Total is increasing (sales of expensive houses were unaffected) and number is decreasing (drop in the number of new houses sold)

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Senior Manager
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23 Nov 2006, 23:42
one more A........

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VP
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24 Nov 2006, 02:31
Thanks guys. OA is A.
_________________

The path is long, but self-surrender makes it short;
the way is difficult, but perfect trust makes it easy.

Kudos [?]: 39 [0], given: 0

24 Nov 2006, 02:31
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# In January there was a large drop in the number of new

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