The annual per capita income in State A rose from 1995 to 2000. During

The answer is B
We can safely drop all other choices except C .
So let us analyse C
The software industry, which provides relatively few jobs at a relatively high payscale, grew rapidly in State A from 1995 to 2000.
Now this offers that the income of very few folks increased substantially and the industry also grew rapidly , if this the case the then the annual household income should have increased but it dropped by 3 percent .So leave this choice.

B is correct as wee can see that the number of people in the house decreased sue to various factors thus reducing the income . But they may have found other high paying jobs thus increase in per ca-pita income

Hi Chetan2u. Nice explanation. But what is wrong with option A ?

Hi ,

Option A is ambiguous as it does not give anything substantial to infer.
We can say that the many folks have been laid off but that does not mean that they can not do business and increase their spending .
Also we can not infer rising per capita income from A

The annual per capita income in State A rose from 1995 to 2000. During the same time period, the average annual household income in State A fell by more than three percent.

Which of the following, if true, would best explain the discrepancy above?

A. The industries that were the greatest employers in State A prior to 1995 laid off much of their work force in the 1995-2000 period.
B. Due to divorce, a lowered birth rate, and other factors, the average number of individuals per household in State A declined from 1995 to 2000.
C. The software industry, which provides relatively few jobs at a relatively high payscale, grew rapidly in State A from 1995 to 2000.
D. During the late 1990's, the state government in State A drastically reduced property taxes.
E. States adjacent to State A also had simultaneous increases in per capita income and decreases in average household income in the 1995-2000 period.


hi..

two facts :-
1) income per person has increased
2) income per group of the same person has decreased

ONLY reason that the group has gone smaller

lets see the choices that tells us so or gives a similar/another logic for decrease in group inspite of increase in each members increase

B gives us the same reason of decrease in members per group..
say each member income has grown from 100 to 130..
so each household when consisted of 4 members had average income of 400
Now with household decreased to 3 person will have an average income of 3*130 = 390 so reduced by approx 3 %.[/quote]
Hi Chetan2u. Nice explanation. But what is wrong with option A ?[/quote]

Hi ,

Option A is ambiguous as it does not give anything substantial to infer.
We can say that the many folks have been laid off but that does not mean that they can not do business and increase their spending .
Also we can not infer rising per capita income from A[/quote]

Thanks Arvind910619. That helps.

KAPLAN OFFICIAL SOLUTION:

Correct Choice: (B)

Individual income went up, but household income went down. A possible explanation is that the number of individuals per household declined. Choice (B) states exactly this, and is therefore the best answer.

Choices (A) and (C) both address factors that could change income levels, but neither can explain the simultaneous decline in household income and rise n personal income. Choice (D) doesn’t address income at all. Choice (E) suggests that other states experienced the same phenomenon, but doesn’t explain it.

We are given two facts:
1. Avg APCI (annual per capita income) increased
2. Average AHI (annual household income) decreased

Ideally, both should have increased in this case. So what we need to solve for is "why did avg AHI go down" given avg APCI went up?

AHI = Avg no of family members * Proportion of Earning members * Avg APCI

We know, APCI went up. Therefore, avg no of family members OR proportion of earning members OR both should have decreased

--> ideally the percentage decrease should be more than the percentage increase of APCI. But since we're looking for the best explanation out of given options, we can ignore this detail.


Now, looking at the answer choices:
A. The industries that were the greatest employers in State A prior to 1995 laid off much of their work force in the 1995-2000 period

This choice talks about decrease in number of employees, however, this in insufficient as there could be other factors because of which employment could have increased as well.

B. Due to divorce, a lowered birth rate, and other factors, the average number of individuals per household in State A declined from 1995 to 2000.

This choice explicitly mention that average number of individuals per household went down, therefore, it is possible that a few earning individuals also might have reduced in every household. This choice seems to be decent - but it would be ideal to eliminate all others to be sure.

C. The software industry, which provides relatively few jobs at a relatively high payscale, grew rapidly in State A from 1995 to 2000.

This choice tells us that APCI went up and a few jobs were added - this tells us that APCI went up but doesn't explain as to why AHI would reduce - therefore is incomplete.

D. During the late 1990's, the state government in State A drastically reduced property taxes.

This choice doesn't tell us how property taxes correlate with APCI or AHI - therefore is irrelevant.

[color=#000000]E. States adjacent to State A also had simultaneous increases in per capita income and decreases in average household income in the 1995-2000 period.[/color]

Data on nearby states is irrelevant to state A. We need to solve for why AHI went down - this option helps in no way.

Therefore, choice B is the most suited out of all, though it is not the best in absolute terms.

Hello from the GMAT Club VerbalBot!

Thanks to another GMAT Club member, I have just discovered this valuable topic, yet it had no discussion for over a year. I am now bumping it up - doing my job. I think you may find it valuable (esp those replies with Kudos).

Want to see all other topics I dig out? Follow me (click follow button on profile). You will receive a summary of all topics I bump in your profile area as well as via email.