12 Days of Christmas GMAT Competition - Day 10: In an isolated economy

(A) Incorrect: While a decrease in supply can lead to an increase in price, an increase in demand can also lead to an increase in price.
(B) Correct: If demand (which is directly proportional to population size) remains constant and supply increases, the price would decrease according to basic economic principles.
(C) Incorrect: A decrease in population size would lead to a decrease in demand, which would typically lead to a decrease in price, not an increase.
(D) Incorrect: While a larger population can increase demand, it doesn't mean that the price will always decrease as population increases. Supply also plays a role in determining price.
(E) Incorrect: Changes in supply do not automatically lead to compensating changes in demand.

(A) any increase in the market price of a commodity is the result of a decrease in its supply

(B) if the population size remains constant, an increase in the supply of a commodity will lead to a decrease in its market price -->wrong if the demand increase, price is not decrease

(C) if there is a decrease in the population size, then, other things being equal, the market price of commodities must increase --> wrong if ppl is fewer and ppl have the same taste, price must decrease

(D) the market price of a commodity is inversely related to the size of the population --> wrong it depends on demand

(E) whatever changes in supply occur, there will be compensating changes in consumer demand --> too broad

I choose A

(A) cannot be inferred from the information given. While changes in supply can affect the market price, it is not specified that an increase in price is solely due to a decrease in supply. Other factors, such as changes in consumer demand, could also influence the market price.

(B) is true based on the information given. In an isolated economy with a constant population size, where total consumer demand is directly proportional to population size, an increase in the supply of a commodity would result in a larger supply relative to the stable consumer demand. This increased supply relative to demand would likely lead to a decrease in the market price of the commodity.

(C) is false based on the information given. In an isolated economy where total consumer demand is directly proportional to population size, a decrease in the population size would result in a decrease in consumer demand. With a decrease in demand and assuming supply remains constant, the market price of commodities would likely decrease, not increase.

(D) is not necessarily true based on the information given. The information states that total consumer demand is directly proportional to population size, but it does not specify the exact relationship between market price and population size. Other factors, such as changes in supply, can also affect the market price.

(E) cannot be inferred from the information given. While changes in supply and consumer demand are the two factors that can directly affect the market price of a commodity, it is not specified that they will always compensate for each other.

Based on this evaluation, the true statement in this isolated economy is (B) if the population size remains constant, an increase in the supply of a commodity will lead to a decrease in its market price.

In an isolated economy, the only two factors that can directly affect the market price of a commodity are changes in its supply and changes in consumer demand. In such an economy, the total consumer demand is directly proportional to the population size.

If the statements above are true, then it is also true that in this isolated economy:

(A) any increase in the market price of a commodity is the result of a decrease in its supply - Not necessarily true. As it could also be the result of increase in population size and, therefore, increase in the consumer demand.

(B) if the population size remains constant, an increase in the supply of a commodity will lead to a decrease in its market price - Yes, this must be true. Since, according to the stimulus, the only two factors that can directly affect the market price of a commodity are changes in its supply and changes in consumer demand. And the total consumer demand is directly proportional to the population size. Thus, if population size increases, the demand increases and vice-versa. And if the population size remains constant, thus the demand remains constant, an increase in the supply of a commodity MUST lead to a decrease in its market price.

(C) if there is a decrease in the population size, then, other things being equal, the market price of commodities must increase - Opposite answer. According to the passage, if population size decreases, the demand decreases. And if the demand decreases, the market price of commodities must DECREASE, NOT increase.

(D) the market price of a commodity is inversely related to the size of the population - Opposite answer. If population size increases, the demand increases. And if demand increases, the market price of a commodity increases. Therefore, the market price of a commodity is directly related to the size of the population.

(E) whatever changes in supply occur, there will be compensating changes in consumer demand - Not necessarily true. Since, the consumer demand is directly proportional to the population size.

argument states that
market price = ∆ in supply * ∆ in consumer dd
and consumer dd = population size



(A) any increase in the market price of a commodity is the result of a decrease in its supply not necessarily what if demand also falls

(B) if the population size remains constant, an increase in the supply of a commodity will lead to a decrease in its market price this can be true

(C) if there is a decrease in the population size, then, other things being equal, the market price of commodities must increase market price will fall in this case

(D) the market price of a commodity is inversely related to the size of the population no it is directly related

(E) whatever changes in supply occur, there will be compensating changes in consumer demand if ss increases and demand is same then price can fall and if ss decreases so does dd then price will also fall

OPTION B

In an isolated economy, the only two factors that can directly affect the market price of a commodity are changes in its supply and changes in consumer demand. In such an economy, the total consumer demand is directly proportional to the population size.

If the statements above are true, then it is also true that in this isolated economy:

(A) any increase in the market price of a commodity is the result of a decrease in its supplyIncorrect

(B) if the population size remains constant, an increase in the supply of a commodity will lead to a decrease in its market priceIncorrect

(C) if there is a decrease in the population size, then, other things being equal, the market price of commodities must increaseIncorrect

(D) the market price of a commodity is inversely related to the size of the populationcorrect

(E) whatever changes in supply occur, there will be compensating changes in consumer demandIncorrect

Let's analyze the options:
(A) any increase in the market price of a commodity is the result of a decrease in its supply
Logic gap: What if there is change in consumer demand.
(B) if the population size remains constant, an increase in the supply of a commodity will lead to a decrease in its market price
Yes sounds good an isolated economy is affected by two things and thus population remaining constant is sufficient for it to be true.
(C) if there is a decrease in the population size, then, other things being equal, the market price of commodities must increase
No it is contradictory to the statements above.
(D) the market price of a commodity is inversely related to the size of the population
No we cant comment above our paygrade for sure.
(E) whatever changes in supply occur, there will be compensating changes in consumer demand
Again cant comment above our paygrade so (B) is the final answer imo

(A) any increase in the market price of a commodity is the result of a decrease in its supply
-- Any increase in price need not result from a decrease in supply, it can happen from an increase in demand too. Eliminate.

(B) if the population size remains constant, an increase in the supply of a commodity will lead to a decrease in its market price
-- Correct, if the population stays constant, the demand stays constant, and therefore an increase in supply will result in a decrease in the market price.

(C) if there is a decrease in the population size, then, other things being equal, the market price of commodities must increase
-- The decrease in population does imply a decrease in demand which will reduce the price rather than increase. Eliminate.

(D) the market price of a commodity is inversely related to the size of the population
-- The price and population can be directly related if supply changes. E.g. - If demand increases by 10 units but supply decreases by 100 units then the price will definitely increase since the product will be in a high demand. Eliminate.

(E) whatever changes in supply occur, there will be compensating changes in consumer demand
-- Not necessarily, the change in supply can be offset by a change in price while demand stays the same. Eliminate.

Ans=B.

In an isolated economy, the only two factors that can directly affect the market price of a commodity are changes in its supply and changes in consumer demand. In such an economy, the total consumer demand is directly proportional to the population size.


If the statements above are true, then it is also true that in this isolated economy:

Type of Question: Inference, So, we only justify phrases stated by the text

(A) any increase in the market price of a commodity is the result of a decrease in its supply --> No, because we do not know what happened with the demand

(B) if the population size remains constant, an increase in the supply of a commodity will lead to a decrease in its market price --> Not Right, because the text does not mention that the only factor that affects demand is the population size

(C) if there is a decrease in the population size, then, other things being equal, the market price of commodities must increase --> Yes, Right. Because, the other factors are constant, so any change in the demand affects the change in the prices

(D) the market price of a commodity is inversely related to the size of the population --> Wrong, We do not know this relation

(E) whatever changes in supply occur, there will be compensating changes in consumer demand --> Wrong, the author does not mention that is neccesary compensate any change

Right answer: C

In an isolated economy, the only two factors that can directly affect the market price of a commodity are changes in its supply and changes in consumer demand. In such an economy, the total consumer demand is directly proportional to the population size.

If the statements above are true, then it is also true that in this isolated economy:

(A) any increase in the market price of a commodity is the result of a decrease in its supply (Increase in price can also be a result of change in consumer demand.)

(B) if the population size remains constant, an increase in the supply of a commodity will lead to a decrease in its market price (Correct. This takes into account both factors, and it keeps one factor constant while correctly inferring from the second factor.)

(C) if there is a decrease in the population size, then, other things being equal, the market price of commodities must increase (If population size decrease, then consumer demand decrease, so market price decrease.)

(D) the market price of a commodity is inversely related to the size of the population (No. It is directly related to size of population)

(E) whatever changes in supply occur, there will be compensating changes in consumer demand (Why? This can't be inferred.)

(A) any increase in the market price of a commodity is the result of a decrease in its supply - false, reduction in consumer demand could also affect price.

(B) if the population size remains constant, an increase in the supply of a commodity will lead to a decrease in its market price - true, shifts the balance of supply/demand. Answer B

(C) if there is a decrease in the population size, then, other things being equal, the market price of commodities must increase - False, a decrease in population would decrease demand, therefore the price as well

(D) the market price of a commodity is inversely related to the size of the population - False, the demand is directly proportional to population, as demand goes up so does the price.

(E) whatever changes in supply occur, there will be compensating changes in consumer demand - False, the demand is tied to the population, not the supply.

Market price = f(change in supply) & f(change in consumer demand)

Consumer demand = population size

(A) any increase in the market price of a commodity is the result of a decrease in its supply..........We can infer this for sure. We don't know what happens to the demand.

(B) if the population size remains constant, an increase in the supply of a commodity will lead to a decrease in its market price
............This seems probable. oversupply leading to a decrease in market price. Keep this.

(C) if there is a decrease in the population size, then, other things being equal, the market price of commodities must increase
...............Demand is low then the market price should increase. This is not true.

(D) the market price of a commodity is inversely related to the size of the population........can't say conclusively from the given information.

(E) Whatever changes in supply occur, there will be compensating changes in consumer demand..........can't infer from the given information.


Option B should be the answer.

In an isolated economy
- The market price of a commodity is directly affected by changes in its supply and changes in consumer demand.
- The total consumer demand is directly proportional to the population size.

If the statements above are true, then it is also true that in this isolated economy:

(A) any increase in the market price of a commodity is the result of a decrease in its supply
this is true provided that the demand is constant or has increased - but we can't assume that - incorrect

(B) if the population size remains constant, an increase in the supply of a commodity will lead to a decrease in its market price
if the population size remains constant =>demand is constant, then an increase in the supply of a commodity will lead to a decrease in its market price - seems reasonable - good to keep.

(C) if there is a decrease in the population size, then, other things being equal, the market price of commodities must increase
decrease in population => decrease in demand, then market price of commodities will increase if we assume that the supply has decreased - but we can't assume this - incorrect

(D) the market price of a commodity is inversely related to the size of the population
This is not supported by the given information. The total consumer demand is directly proportional to the population size, but the market price is influenced by both supply and demand. - incorrect

(E) whatever changes in supply occur, there will be compensating changes in consumer demand
The information doesn't state that changes in supply are always compensated by changes in consumer demand. - incorrect
Answer B

Answer: (B)

(A): Question states that price is directly affected by both supply and demand. Thus, it's illogical to conclude that increase in price must be associated with a change in the supply since demand could be the affecting factor.
(B): Correct. Basic economics follows this logic.
(C): Since population size is directly associated with demand, decrease in size means decrease in demand. If there is a decrease in demand, one would expect an increase in price, not a decrease.
(D): The size of the population is directly associated with demand. Then, the price is also directly associated with population, since demand is directly associated with price, not inversely.
(E): There is no evidence for this.

(A) any increase in the market price of a commodity is the result of a decrease in its supply
not true, if demand of the commodity increases, its market price increases

(B) if the population size remains constant, an increase in the supply of a commodity will lead to a decrease in its market price
true, population constant, demand constant, supply increases, market price decreases
CORRECT

(C) if there is a decrease in the population size, then, other things being equal, the market price of commodities must increase
not true, population decreases, demand decreases and market price decreases

(D) the market price of a commodity is inversely related to the size of the population
not true, market price is directly related to the size of the population

(E) whatever changes in supply occur, there will be compensating changes in consumer demand
not true, changes in supply can be compensated via demand or via market price

IMO B

IMO b

A - not necessarily true, could be increase in demand

B - yes, if population is consistent then demand will be consistent and more supply will lower price

(C) - prices tend to increase and not decrease w more demand and same supply

(D) - wrong see above, higher population can mean higher price

(E) - false, demand doesn’t have to compensate prices may just increase

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In an isolated economy, the only two factors that can directly affect the market price of a commodity are changes in its supply and changes in consumer demand. In such an economy, the total consumer demand is directly proportional to the population size.

If the statements above are true, then it is also true that in this isolated economy:


Since there are only two factors that can directly affect the market price of a commodity are changes in its supply and changes in consumer demand. Therefore, any increase in the market price of a commodity can not be attributed to a decrease in its supply alone.
Incorrect


If the population size remains constant, the consumer demand will remain constant and any increase in supply will result in decrease in market price.
Correct


A decrease in population size will result in decrease in consumer demand, resulting in decrease in market price of commodities.
Incorrect


The market price of a commodity is directly proportional to consumer demand which is directly proportional to the size of the population.
Incorrect


Any changes in supply may result in corresponding changes in prices and NOT in compensating changes in consumer demand. This may be the case with essential commodities.
Incorrect.

IMO B