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Sales taxes tend to be regressive, affecting poor people more severely

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Sales taxes tend to be regressive, affecting poor people more severely  [#permalink]

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New post 24 Jan 2009, 12:31
2
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A
B
C
D
E

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79% (01:07) correct 21% (01:13) wrong based on 154 sessions

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Sales taxes tend to be regressive, affecting poor people more severely than wealthy people. When all purchases of consumer goods are taxed at a fixed percentage of the purchase price, poor people pay a larger proportion of their income in sales taxes than wealthy people do.

It can be correctly inferred on the basis of the statements above that which of the following is true?


(A) Poor people constitute a larger proportion of the taxpaying population than wealthy people do.

(B) Poor people spend a larger proportion of their income on purchases of consumer goods than wealthy people do.

(C) Wealthy people pay, on average, a larger amount of sales taxes than poor people do.

(D) The total amount spent by all poor people on purchases of consumer goods exceeds the total amount spent by all wealthy people on consumer goods.

(E) The average purchase price of consumer goods bought by wealthy people is higher than that of consumer goods bought by poor people.

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Re: Sales taxes tend to be regressive, affecting poor people more severely  [#permalink]

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New post 24 Jan 2009, 13:27
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IMO B..
priyankur_saha@ml.com wrote:
Sales taxes tend to be regressive, affecting poor people more severely than wealthy people. When all purchases of consumer goods are taxed at a fixed percentage of the purchase price, poor people pay a larger proportion of their income in sales taxes than wealthy people do.
It can be correctly inferred on the basis of the statements above that which of the following is true?
(A) Poor people constitute a larger proportion of the taxpaying population than wealthy people do. - don't have information about total taxpayers and % of poor or welthy ppl pay tax...so out
(B) Poor people spend a larger proportion of their income on purchases of consumer goods than wealthy people do. - hold on....poor and welthy depends on their income. suppose poor person's income is $10 and out of that he/she spents $5 on consumer goods, means 50% of total income spent on consumer good. On the other hand income of wealthier person is $100, tax for welthier is also same and total expenditure is $5 it means only 5% of his income spent on consumer goods. It means poor spend larger proportion of his income.
(C) Wealthy people pay, on average, a larger amount of sales taxes than poor people do. - sales tax is same for all....out
(D) The total amount spent by all poor people on purchases of consumer goods exceeds the total amount spent by all wealthy people on consumer goods. - total amount doesn't tell anything, % required...out
(E) The average purchase price of consumer goods bought by wealthy people is higher than that of consumer goods bought by poor people. - this doesn't make any sense, suppose if poor and wealthy both go to walmart and buy the goods which are of same price, then also income of wealthy and poor is different....so we can not infer this from stem....out


IMO B
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Re: Sales taxes tend to be regressive, affecting poor people more severely  [#permalink]

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New post 02 Jan 2014, 08:17
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+B.

This is a percentage inference question. All that I do to answer such questions is to pay strong attention to the details of the argument. For example, I shall not choose an answer choice that talks about absolute quantities or numbers when the argument only tells me about proportions or percentages. Let's look at details now.

Sales taxes tend to be regressive, affecting poor people more severely than wealthy people. When all purchases of consumer goods are taxed at a fixed percentage of the purchase price, poor people pay a larger proportion of their income in sales taxes than wealthy people do.
It can be correctly inferred on the basis of the statements above that which of the following is true?
(A) Poor people constitute a larger proportion of the taxpaying population than wealthy people do.The argument does not mention anything about the proportions of poor and wealthy people.
(B) Poor people spend a larger proportion of their income on purchases of consumer goods than wealthy people do.Correct. Since poor people pay larger proportion of their income in sales taxes than do wealthy people, it is true that poor spend larger proportion of their income on purchasing consumer goods than do wealthy people.
(C) Wealthy people pay, on average, a larger amount of sales taxes than poor people do.How can we infer the actual amount of sales taxes? Wrong.
(D) The total amount spent by all poor people on purchases of consumer goods exceeds the total amount spent by all wealthy people on consumer goods.Again the total amount spent. Same as C.
(E) The average purchase price of consumer goods bought by wealthy people is higher than that of consumer goods bought by poor people.Average is an absolute quantity. Same as C and D. Wrong.

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Re: Sales taxes tend to be regressive, affecting poor people more severely  [#permalink]

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New post 02 Jan 2014, 08:40
Sales taxes tend to be regressive, affecting poor people more severely than wealthy people. When all purchases of consumer goods are taxed at a fixed percentage of the purchase price, .
It can be correctly inferred on the basis of the statements above that which of the following is true?
(A) Poor people constitute a larger proportion of the taxpaying population than wealthy people do. IRRELEVANT
(B) Poor people spend a larger proportion of their income on purchases of consumer goods than wealthy people do. CORRECT.... EVEN LOGICALLY GENERALLY CONSUMER GOODS WILL NOT BE MUCH DIFFERENT BETWEEN RICH AND POOR ...... BUT SINCE POOR EARN LESS...THEY WOULD spend a larger proportion of their income on purchases of consumer goods. AND THE CONCLUSION SAYS THAT poor people pay a larger proportion of their income in sales taxes than wealthy people do......THIS IS THE CORRECT ANSWER ...
(C) Wealthy people pay, on average, a larger amount of sales taxes than poor people do.MAY NOT BE CORRECT
(D) The total amount spent by all poor people on purchases of consumer goods exceeds the total amount spent by all wealthy people on consumer goods.MAY NOT BE TRUE
(E) The average purchase price of consumer goods bought by wealthy people is higher than that of consumer goods bought by poor people.MAY NOT BE TRUE
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Re: Sales taxes tend to be regressive, affecting poor people more severely  [#permalink]

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New post 02 Jan 2014, 09:00
B should be the answer.That's because the argument says the percentage of poor households' income paid in sales tax is higher than that of rich households.It means that the poor households must be spending a higher %age of income on purchasing consumer goods than rich households do.
Suppose,a poor house earns $1000 and spends 50% i.e. $500 on consumption goods.Assuming a tax rate of 10%, tax liability will be $50 i.e. 5% of total income.
Again,suppose a rich house earns $10,000 and spends $1,000 on consumption goods i.e. 10%.Its tax liability will be $100 i.e.1% of total income.The absolute amt. is higher for a rich house($100) but the %age is higher for the poor one(5%).
The % of income spent on goods is also higher for poor house (50% as compared to 10% for a rich one.)

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Re: Sales taxes tend to be regressive, affecting poor people more severely  [#permalink]

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New post 23 Jul 2017, 11:27
Option E talks about -"The average purchase price of consumer goods " and comparison is made between wealthy and poor

But as per the argument, its speaks about the proportion of income.
Income for poor is less compared to wealthy person, so if a poor and wealthy buy any item, proportion of spending of wealthy is quite smaller than poor person.

Inference - Must be true, Whatever author says is true.
So Answer if inference should match with what authors believe and conveys.

- Average purchase is irrelevant answer

Answer is B
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Re: Sales taxes tend to be regressive, affecting poor people more severely  [#permalink]

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New post 04 Sep 2018, 04:58
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Re: Sales taxes tend to be regressive, affecting poor people more severely &nbs [#permalink] 04 Sep 2018, 04:58
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