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

Question

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?

1. 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.
2. 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.
3. The software industry, which provides
relatively few jobs at a relatively high payscale,
grew rapidly in State A from 1995 to
2000.
4. During the late 1990â€™s, the state
government in State A drastically reduced
property taxes.
5. States adjacent to State A also had
simultaneous increases in per capita income
and decreases in average household income
in the 1995-2000 period.

rnachloo · Answer

hmm.. between A and C. I am chosing C.

Clearly D and E are wrong. 

B - Number of people in the household decresed, that will probably not change the average household income because whatever income is subtracted from one family is added to another family. (ex. divorce and remarried etc)


Between A and C, I chose C as "less people, more income. Per capital increases, no effect on average household income"

Futuristic · Answer

straight B.
The per capita income increased, but per house income decreaseed. 

PHI = PCI x members in the house.

If PHI down even though PCI is up, members must decrease per household.

pelihu · Answer

I think the answer is B.

A does not apply. B doesn't matter because the passage already identifies what happens to income - we don't need to analyze the components of it. C doesn't even deal with income. D just doesn't relate the the question at all.

ps_dahiya · Answer

Straight B.

Only reason that can reduce the average household income and increase per capita income is reduction in size of households.

sharadGmat · Answer

I can understand how divorce can reduce average household income.. But how will reduced familly size increase per capita income ? 
Per capita income is independent of family size..

ps_dahiya · Answer

Low birth rate.

zoom612 · Answer

Agree with B.

jaynayak · Answer

Clear winner B.

The per capita income is rising but the average household income is declining. 

This can happen if the number of earning members in a household decrease.

In this case divorce can remove an earning member and create another member.

Professor · Answer

B. for two reasons:

1. none but only B talks about the households and the question is about the households' income and per capital income. so B is straight.

2. it is very useful to use an example: 

year 1995:
population = 10 millions
income = 200,000 millions
households = 2 millions
  per capita income = 20,000  
  avg. household income = 100,000  

year 2000:
population = 12 millions
income = 300,000 millions
households = 4 millions
  per capita income = 25,000  
  avg. household income = 75,000  

the households' income decreased because of higher number of households.

b14kumar · Answer

This is the clear reason.

FYI...

 Per Capita Income  is the mean income computed for every man, woman, and child in a particular group. It is derived by dividing the total income of a particular group by the total population in that group.
 
 Household income  is defined as the sum of gross income received by each household member aged 15 and over.

Regards,
Brajesh

xsports · Answer

Clear B.

GMATT73 · Answer

Late, but straight (B). Nice equation Futuristic.

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

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