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In the past year, there has been a large drop in the number

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Director
Joined: 30 Jun 2007
Posts: 752
In the past year, there has been a large drop in the number [#permalink]

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16 Jul 2008, 22:44
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In the past year, there has been a large drop in the number of new cars sold, due to harsh economic conditions in the marketplace and high taxes. At the same time, the average price paid for a new car has risen dramatically.
Which of the following, if true, best explains the increase in the average price of a new car?

A. The price of used cars has climbed steadily over the past ten years.

B. There will be a tax reduction later in the year which is expected to aid moderate and low income families.

C. The market for expensive car has been unaffected by the current economic conditions.

D. Economic conditions are expected to get significantly worse before the end of the year.

E. Low demand for trucks and vans has led to lower production in the factories.

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Senior Manager
Joined: 23 May 2006
Posts: 304
Re: CR: Average Car Prices [#permalink]

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16 Jul 2008, 22:46
IMO C
Director
Joined: 14 Aug 2007
Posts: 695
Re: CR: Average Car Prices [#permalink]

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16 Jul 2008, 23:03
hanumayamma wrote:
In the past year, there has been a large drop in the number of new cars sold, due to harsh economic conditions in the marketplace and high taxes. At the same time, the average price paid for a new car has risen dramatically.
Which of the following, if true, best explains the increase in the average price of a new car?

A. The price of used cars has climbed steadily over the past ten years.
used cars: out of scope

B. There will be a tax reduction later in the year which is expected to aid moderate and low income families.
doesnt answer why average price went up

C. The market for expensive car has been unaffected by the current economic conditions.

consider two types of cars : expensive + unexpensive, # of cars sold in "unexpensive" category is less, and the expensive ones' sell is contstant

earlier 4 unexpensive cars were sold at 25\$ each (100\$)& 4 expensive cars were sold at \$50 (200\$): average price = 300/8 = 37\$

now only 1 unexpensive car is getting sold (\$25) but still 4 expensive cars are sold as before (\$200)
avg price : 225/5 = 45\$ => average price up

D. Economic conditions are expected to get significantly worse before the end of the year.
same as B

E. Low demand for trucks and vans has led to lower production in the factories.

I think answer should be C.
Current Student
Joined: 18 Jun 2008
Posts: 224
Re: CR: Average Car Prices [#permalink]

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16 Jul 2008, 23:08
I agree, this is a pretty straightforward C
Manager
Joined: 04 Apr 2008
Posts: 204
Location: Pune
Re: CR: Average Car Prices [#permalink]

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16 Jul 2008, 23:29
I think C is the correct choice as it is asked is to resolve the paradox
Option A talks about a generalised way but what we are talking is about the last year and this year and it is tlking about the used cars where as the question it asks for the new car
option B Talks of something else
option C Yup if the maket for expensive cars is unaffected then there is a possiblity that for average price to increase
option D Not related out of scope
option E is out of scope

hanumayamma wrote:
In the past year, there has been a large drop in the number of new cars sold, due to harsh economic conditions in the marketplace and high taxes. At the same time, the average price paid for a new car has risen dramatically.
Which of the following, if true, best explains the increase in the average price of a new car?

A. The price of used cars has climbed steadily over the past ten years.

B. There will be a tax reduction later in the year which is expected to aid moderate and low income families.

C. The market for expensive car has been unaffected by the current economic conditions.

D. Economic conditions are expected to get significantly worse before the end of the year.

E. Low demand for trucks and vans has led to lower production in the factories.

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Senior Manager
Joined: 10 Mar 2008
Posts: 331
Re: CR: Average Car Prices [#permalink]

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17 Jul 2008, 00:51
C it is. I was stuck between E and C, but picked C as it seemed to be a safer choice.

E - Wouldnt low demand and production cut backs lead to higher prices to maintain the inverntory levels. This could be a flawed reasoning, but let me know your comments. Cheers!
Senior Manager
Joined: 14 Mar 2007
Posts: 274
Location: Hungary
Re: CR: Average Car Prices [#permalink]

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17 Jul 2008, 04:15
I agree with C. Very clear.
Current Student
Joined: 18 Jun 2008
Posts: 224
Re: CR: Average Car Prices [#permalink]

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17 Jul 2008, 11:11
vksunder wrote:
C it is. I was stuck between E and C, but picked C as it seemed to be a safer choice.

E - Wouldnt low demand and production cut backs lead to higher prices to maintain the inverntory levels. This could be a flawed reasoning, but let me know your comments. Cheers!

I think there are at least 2 assumptions that are needed for E to be a viable answer
1 - inventory levels need to stay the same regardless of demand (not true in many cases)
2 - vans & trucks are representative of the average car price (also not true)
Senior Manager
Joined: 25 Nov 2006
Posts: 251
Re: CR: Average Car Prices [#permalink]

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17 Jul 2008, 11:37
Yup C....
Intern
Joined: 28 Sep 2008
Posts: 1
Re: CR: Average Car Prices [#permalink]

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28 Sep 2008, 22:21
By offering various guides we have all the facts you’ll need to make an informed choice on the investment of buying a new or used car..
the car price depends on the following details of the car
History - the vehicles’ development, changes made from previous models.
On The Road - how does it drive?
What To Get - which model in the range should you buy?
What To Pay - what kind of prices are you looking at?
Potential Problems - anything that might warrant closer attention. Remember both new and used cars can have problems
Parts Prices - how much will those new brake pads cost?
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Joined: 22 Jul 2008
Posts: 39
Re: CR: Average Car Prices [#permalink]

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28 Sep 2008, 22:48
IMO "C"

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Re: CR: Average Car Prices   [#permalink] 28 Sep 2008, 22:48
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In the past year, there has been a large drop in the number

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