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

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?

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.

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sayan640 · Answer

C should be the answer. Average per capita income = total income/ total population.
If software industry helped in increasing income but that increase happened for only few people , then that explains why annual per capita income rose but average annual household income declined. As income of those people don't account for many households , average annual income for households declined.

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tanishqgirotra · Answer

I completely disagree with option B as the correct answer

Shinigami_R · Answer

C makes more sense to me than B. Any explanantion as to why C is wrong and B is correct?

chetan2u · Answer

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.

Let us understand and analyze the above statement..

1995 : Say, there are 1000 person with average income of $100, so total income = $100,000. Now, total family households are 200, so average annual household income = 100,000/200 = $500.

2000 : Comes the year 2000 and we have average annual income increasing, so say the population remaining same, the average income becomes 150, so total = 150,000. If there are 200 households still then the average household income would also increase = 150,000/200 = $750.
 So when will it decrease?   That will hppen when more households have come up by spliting . So if we have many of the household, for some strange reason, splitting in 2 or more households, we will have more households but same income, say 400 households now.  Then, average household income will be 150,000/400 = $375, less than the average income of 1995, which was $500.

Option B is close to our inference, and is the best possible answer. 
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.

Now, why C does not fit in? 
 C. The software industry, which provides relatively few jobs at a relatively high payscale, grew rapidly in State A from 1995 to 2000. 
 Remember any increase anywhere will affect the total amount, which will then be distributed amongst all house holds and will result in increase in both annual individual income and annual household income. 
Let us take, hypothetically, a person is given $100000 in 2000 from $0 in 1995. So total income becomes 200,000 and annual per capita income becomes 200000/1000 or $200. 
What happens to average annual household income: 200000/200 or $1000, so it also increases. Only way it will decrease is when the denominator, that is, number of households increases.

Hope it clears the doubt.  Shinigami_R   Ashish_Dutt   tanishqgirotra   sayan640

siddhesh11 · Answer

Why not Option A? Because it states that certain industries who were the biggest employers in the state prior to 1995 started laying off people. But it doesn’t mention anywhere that these industries were turning a loss. So isn’t it safe to assume that the per capita income wasn’t really affected and it increased but since people were laid off, the average annual household income dropped?

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Bunuel · Answer

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.

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

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

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