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# It is true that increasing demand for a limited number of

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Senior Manager
Joined: 19 Nov 2007
Posts: 433
It is true that increasing demand for a limited number of [#permalink]

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07 Dec 2008, 16:04
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It is true that increasing demand for a limited number of products drives up the price of those products. However, if we cut tax rates, then people will retain a higher percentage of their income and will be encouraged to work harder and produce more. Therefore the increase in demand resulting from greater disposable income will not result in higher prices for the products available.

In the passage above, the author makes which of the following arguments?

A. Reducing taxes is likely to result in less disposable income.

B. Reducing taxes is likely to decrease demand.

C. Reducing taxes can fail to result in greater disposable income.

D. Reducing taxes will probably restrict the availability of certain products.

E Reducing taxes will not necessarily lead to increased prices.

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Intern
Joined: 05 Oct 2008
Posts: 14

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07 Dec 2008, 17:12
C
Manager
Joined: 16 Jan 2008
Posts: 93

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07 Dec 2008, 21:55
E
VP
Joined: 18 May 2008
Posts: 1181

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07 Dec 2008, 22:47
E
Intern
Joined: 05 Oct 2008
Posts: 14

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08 Dec 2008, 15:39
I just hate CR questions... I just cant see why E is the solution...
Senior Manager
Joined: 23 May 2008
Posts: 386

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08 Dec 2008, 21:26
E is the best choice
VP
Joined: 21 Jul 2006
Posts: 1452

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09 Dec 2008, 01:04
I choose E as my answer. just look at the conclusion of the argument: "Therefore the increase in demand resulting from greater disposable income will not result in higher prices for the products available."

From the conclusion, "greater disposable income" means reduced tax rate according to the argument. So option E stands as the best choice.
VP
Joined: 17 Jun 2008
Posts: 1477

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09 Dec 2008, 01:14
Unless there is a trap, E is the best choice.
Senior Manager
Joined: 19 Nov 2007
Posts: 433

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09 Dec 2008, 06:27
No trap.
OA E.

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If you would like to discuss this question please re-post it in the respective forum. Thank you!

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Re: CR-Taxes   [#permalink] 09 Dec 2008, 06:27
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# It is true that increasing demand for a limited number of

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