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The total market value of real estate in Altonville has steadily decli

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The total market value of real estate in Altonville has steadily decli  [#permalink]

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New post 17 Jan 2019, 02:50
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Why (A) and (B) are wrong ?

The total market value of real estate in Altonville has steadily declined over the past four years. This decline has meant that the overall figure on which the city’s property tax is based—the assessed value of that real estate—has also declined. The percentage of assessed value that was paid as property taxes to the city, however, did not change from year to year during this period.

First lets analyze the argument:
Given -
Overall figure or value on which the tax is based has declined.
The percentage of the value collected has not declined.

Assume the value was 200. The percentage collected as tax was 10%. So the tax they got was 20.
Now It has declined to 100. BUT the percentage collected is still the same 10%. So tax they now get is 10.
This is what we can infer from the argument.

Coming to A and B
(A) The percentage of Altonville’s yearly revenue that comes from money collected in property taxes did not change over the past four years.
(B) The percentage of Altonville’s yearly revenue that comes from money collected in property taxes has declined steadily over the past four years.

Notice that both talk about "percentage of yearly revenue that comes from money collected in property tax".
Lets see why we cannot say anything about this from the info we have.
Total revenue = money from property tax + money from other taxes/sources.

Since we do not know this other sources of revenue, we cannot infer anything about option A and option B.

Lets understand better with an example
-
Assume in year 1 from property tax they collected 200. From other taxes they collected 400.
Total revenue = 200 + 400 = 600
Here some 33.33% of yearly revenue is from property taxes.

Now assume in year 2 from property tax they collected 100. From other taxes they collected 10.
So even with decline of money from property taxes, we still see that "percentage of yearly revenue that comes from money collected in property tax" is higher than previous year. Obviously more than 33.33% is contributed to overall revenue.

So we see how other taxes matter and hence we cannot comment on option A and B.

Hope this helps! :)
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Re: The total market value of real estate in Altonville has steadily decli  [#permalink]

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New post 13 Jun 2019, 10:18
It is better to solve such inference questions mathematically.

1st market value has declined. what is property tax? it is % tax of the value of property

Total revenue from property tax = % tax * property value

It is given that % tax remains constant i.e, for example, it was 8% 4 years ago and it is still 8%

Distance = Speed * time now if speed is constant Distance will decrease with decrease in time

Similarly, Revenue from property tax will decrease with a decrease in property value (keeping % tax as constant)

Exactly what is stated in option C
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Re: The total market value of real estate in Altonville has steadily decli   [#permalink] 13 Jun 2019, 10:18

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