GMAT Question of the Day - Daily to your Mailbox; hard ones only

 It is currently 09 Dec 2018, 13:45

### 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 December
PrevNext
SuMoTuWeThFrSa
2526272829301
2345678
9101112131415
16171819202122
23242526272829
303112345
Open Detailed Calendar
• ### Free GMAT Algebra Webinar

December 09, 2018

December 09, 2018

07:00 AM PST

09:00 AM PST

Attend this Free Algebra Webinar and learn how to master Inequalities and Absolute Value problems on GMAT.
• ### Free lesson on number properties

December 10, 2018

December 10, 2018

10:00 PM PST

11:00 PM PST

Practice the one most important Quant section - Integer properties, and rapidly improve your skills.

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

Author Message
TAGS:

### Hide Tags

Manager
Joined: 21 Dec 2009
Posts: 168
Location: India
In January there was a large drop in the number of new  [#permalink]

### Show Tags

19 Jan 2010, 08:36
5
30
00:00

Difficulty:

95% (hard)

Question Stats:

48% (02:01) correct 52% (02:25) wrong based on 1200 sessions

### HideShow timer Statistics

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

_________________

Cheers,
SD

Magoosh GMAT Instructor
Joined: 28 Nov 2011
Posts: 301
Re: In January there was a large drop in the number of new  [#permalink]

### Show Tags

18 Apr 2012, 12:01
2
The key here is the term "average price of home."

In answer choice (A) it gives us a concrete reason for why the average price of homes would increase: the number of expensive homes sold was higher than usual. Since the rest of the housing market - cheap homes to average priced homes - is not doing as well, the average price of homes sold is going to increase. Even if the number of expensive homes sold remained the same, the average price would still increase if the number of medium-priced homes sales decreased.

In answer (C), we are no longer dealing with averages but with number of units sold. However, we are not worried here about the number of houses sold per se, but the average price of homes sold.

Hope that helps
_________________

Christopher Lele
Magoosh Test Prep

##### General Discussion
Manager
Joined: 21 Dec 2009
Posts: 168
Location: India
Re: In January there was a large drop  [#permalink]

### Show Tags

19 Jan 2010, 13:47
OA is

Explain ur logic pls
_________________

Cheers,
SD

Senior Manager
Joined: 25 Jun 2009
Posts: 278
Re: In January there was a large drop  [#permalink]

### Show Tags

15 Apr 2010, 07:00
1
Kind of late to reply but I guess its better to be late than never :D
I got to the conclusion thru POE,

SudiptoGmat 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.-- Irrelavent

(C) The prices of new houses have been rising slowly over the past three years because there is an increasing shortage of housing. --- Okay, this doesnt expain why the prices rose sharply, in fact this says that the prices have been rising slowly over the past, but the question why the prices rose sharply - So basically tempting wrong answer

(D) There was a greater amount of moderate-priced housing available for resale by owners during January than in the preceding three months. -- This infact weakens it, if the supply is high and demand low then prices should go down.

(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-- This again is irrelavent as in the passage it never mentiones about the increase in the mortage rate
Intern
Joined: 28 Sep 2008
Posts: 5
Re: In January there was a large drop  [#permalink]

### Show Tags

15 Apr 2010, 16:17
I also think it is A.
Manager
Joined: 07 Jan 2010
Posts: 182
Re: In January there was a large drop  [#permalink]

### Show Tags

16 Apr 2010, 00:08
sibijosephv wrote:
I also think it is A.

The OA is mentioned in the above post. It is A.

A and C are the tempting choices.
C, I think, contradicts the premise. It indicates housing shortage, whereas premise is about sales drop. Am I right here?
BTW, I picked A as well.
Director
Joined: 24 Aug 2007
Posts: 763
WE 1: 3.5 yrs IT
WE 2: 2.5 yrs Retail chain
Re: In January there was a large drop  [#permalink]

### Show Tags

27 Apr 2010, 04:57
1
Can someone please explanation why A is correct?

There is no detail in the stimulus regarding higher-priced houses.
People were waiting for mortgages rate drop in January. So, the number of sold house fell. This was accompanied by sharp rise in prices.

This is obvious, as the dealers want to balance their profits. So, C fits the best here.
_________________

Tricky Quant problems: http://gmatclub.com/forum/50-tricky-questions-92834.html
Important Grammer Fundamentals: http://gmatclub.com/forum/key-fundamentals-of-grammer-our-crucial-learnings-on-sc-93659.html

Senior Manager
Joined: 25 Jun 2009
Posts: 278
Re: In January there was a large drop  [#permalink]

### Show Tags

27 Apr 2010, 12:18
ykaiim wrote:
Can someone please explanation why A is correct?

There is no detail in the stimulus regarding higher-priced houses.
People were waiting for mortgages rate drop in January. So, the number of sold house fell. This was accompanied by sharp rise in prices.

This is obvious, as the dealers want to balance their profits. So, C fits the best here.

I boiled down to A by POE, but to answer your question C is wrong because in the question stem it asks why the prices rose sharply and in C it says the prices have been rising slowly and steadily from last 3 years which is in contradiction to the question stem and it does not explain why the prices rose sharply.

Hope that helps ..!

Cheers
Manager
Joined: 06 Apr 2010
Posts: 71
Re: In January there was a large drop  [#permalink]

### Show Tags

31 Aug 2010, 07:21
sharp rise in the average price of new houses sold.

I thought we are dealing with new houses ONLY.
(A) deals with houses (expensive ones), not necessarily new houses. I would have thought that this could be the shell game ; similar concept with slight difference. If the houses mentioned are new houses, it would explained it .
(C) At least we are dealing with new houses here. the prices were rising slowly because the mortgage were higher. When the mortgages fall,the shortage of new housing combined with lower mortgages will drive the price up real fast

I'm sticking with C
Manager
Joined: 16 Apr 2006
Posts: 205
Re: In January there was a large drop  [#permalink]

### Show Tags

02 Sep 2010, 02:47
1
1
If more High Priced houses are sold then average price of the houses sold will increase.

Hence A.
_________________

Trying hard to achieve something unachievable now....

Intern
Joined: 08 Feb 2010
Posts: 47
Re: In January there was a large drop  [#permalink]

### Show Tags

02 Sep 2010, 06:34
Actually bit confused between A and C
Intern
Joined: 17 Mar 2010
Posts: 23
Re: In January there was a large drop  [#permalink]

### Show Tags

02 Sep 2010, 11:12
C doesn't explain the sharp rise in housing price. A is the best.
Manager
Joined: 06 Aug 2010
Posts: 173
Location: Boston
Re: In January there was a large drop  [#permalink]

### Show Tags

02 Sep 2010, 11:18
3
I said (A) immediately. The argument is that the overall number of houses being sold is down due to people waiting for interest rates on mortgages to drop to a minimum. If at the same time, the average price of houses being sold is going up, it follows that the houses still being sold cost more money. The people who would buy more expensive houses wouldn't be (as) concerned with the interest rates on mortgages, so they're still buying their homes.

(C) doesn't work because it mentions a housing shortage, but if sales are down, there would actually be an EXCESS of houses, not a shortage.
Intern
Joined: 08 Feb 2010
Posts: 47
Re: In January there was a large drop  [#permalink]

### Show Tags

03 Sep 2010, 02:13
A and C seems close but will go with A
Manager
Joined: 08 Oct 2010
Posts: 201
Location: Uzbekistan
Schools: Johnson, Fuqua, Simon, Mendoza
WE 3: 10
Re: In January there was a large drop  [#permalink]

### Show Tags

17 Jan 2011, 23:47
I have managed to leave A as an ans. because other answer options couldnot withstand the test of appropriateness to the premise.
Retired Moderator
Status: 2000 posts! I don't know whether I should feel great or sad about it! LOL
Joined: 04 Oct 2009
Posts: 1176
Location: Peru
Schools: Harvard, Stanford, Wharton, MIT & HKS (Government)
WE 1: Economic research
WE 2: Banking
WE 3: Government: Foreign Trade and SMEs
Re: In January there was a large drop  [#permalink]

### Show Tags

15 Apr 2011, 09:39
+1 A

The average price increased because the percentage of expensive houses sold of the total sold has increased in january.
_________________

"Life’s battle doesn’t always go to stronger or faster men; but sooner or later the man who wins is the one who thinks he can."

My Integrated Reasoning Logbook / Diary: http://gmatclub.com/forum/my-ir-logbook-diary-133264.html

GMAT Club Premium Membership - big benefits and savings

VP
Status: There is always something new !!
Affiliations: PMI,QAI Global,eXampleCG
Joined: 08 May 2009
Posts: 1033
Re: In January there was a large drop  [#permalink]

### Show Tags

20 May 2011, 07:22
A and C come close.

C says that prices have been increasing steadily. Thats the fallacy used.

A says that high priced houses might have caused the sharp price rise,as lesser buyers automatically translates to increase in prices.

A it is.
Manager
Joined: 26 Jul 2010
Posts: 85
Location: India
Concentration: Operations, General Management
Schools: IIMA (M)
GMAT 1: 640 Q48 V29
GMAT 2: 670 Q49 V31
WE: Supply Chain Management (Military & Defense)
Re: In January there was a large drop  [#permalink]

### Show Tags

20 May 2011, 08:28
A because of rise in avg price of household sold..

nice question..
_________________

lets start again

Manager
Joined: 28 May 2011
Posts: 159
Location: United States
GMAT 1: 720 Q49 V38
GPA: 3.6
WE: Project Management (Computer Software)
Re: In January there was a large drop  [#permalink]

### Show Tags

29 Jun 2011, 22:25
Option A seems to be the best answer

My explanation:

average price of new houses sold (Z) =
((average price of High-price house sold * Nbr of High-price houses sold) + (average price of Low-price house sold * Nbr of Low-price houses sold)) / (Nbr of High-price houses sold + Nbr of Low-price houses sold)

That is

Avg = (A*B ) + (C*D))/(B+D)
Where A (average price of High-price house sold) < C (average price of Low-price house sold)
and B (Nbr of High-price houses sold) is constant but D (Nbr of Low-price houses sold) has Decreased

So its quiet evident that "average price of new houses sold (Z)" would increase
_________________

-------------------------------------------------------------------------------------------------------------------------------
http://gmatclub.com/forum/a-guide-to-the-official-guide-13-for-gmat-review-134210.html
-------------------------------------------------------------------------------------------------------------------------------

Manager
Joined: 13 May 2011
Posts: 234
WE 1: IT 1 Yr
WE 2: Supply Chain 5 Yrs
Re: In January there was a large drop in the number of new  [#permalink]

### Show Tags

18 Apr 2012, 05:55
First of all this is Not a strengthen type Q. This is more like Resole the paradox.
So, two contradictory facts are given. We have to answer: why average price of sold house has gone up, while the demand is supposed to be low. Only A answers the question clearly.
Re: In January there was a large drop in the number of new &nbs [#permalink] 18 Apr 2012, 05:55

Go to page    1   2    Next  [ 32 posts ]

Display posts from previous: Sort by