Critical Reasoning

19. In January there was a large drop in the number of new houses sold, because interest rates for mortgages were falling and many consumers were waiting to see how low the rates would go. This large sales drop was accompanied by a sharp rise in the average price of new houses sold.
Which of the following, if true, best explains the sharp rise in the average price of new houses?
(A) Sales of higher-priced houses were unaffected by the sales drop because their purchasers have fewer constraints limiting the total amount they pay.
(B) Labor agreements of builders with construction unions are not due to expire until the next January.
(C) The prices of new houses have been rising slowly over the past three years because there is an increasing shortage of housing.
(D) There was a greater amount of moderate-priced housing available for resale by owners during January than in the preceding three months.
(E) Interest rates for home mortgages are expected to rise sharply later in the year if predictions of increased business activity in general prove to be accurate.

Will post IMO by EOD

IMO A

IMO:A


IF the purchasers dont have any problem or constraints paying the total cost of the houses then why would they care about mortgages interest rates..

And if high-priced houses costs are not affected and if they are more number of houses that are sold then of course average price of houses will increase.

I will go with A

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Could you please email me the copy of 1000 sc? I really need it. Thank you in advance. My id is: [email protected]

raunekk wrote:IMO:A


IF the purchasers dont have any problem or constraints paying the total cost of the houses then why would they care about mortgages interest rates..

And if high-priced houses costs are not affected and if they are more number of houses that are sold then of course average price of houses will increase.

The A doesn't explain the reason of the "sharp rise" of high-priced houses costs. There is no sign of the more number of houses sold.

Jason11 wrote:

raunekk wrote:IMO:A


IF the purchasers dont have any problem or constraints paying the total cost of the houses then why would they care about mortgages interest rates..

And if high-priced houses costs are not affected and if they are more number of houses that are sold then of course average price of houses will increase.

The A doesn't explain the reason of the "sharp rise" of high-priced houses costs. There is no sign of the more number of houses sold.

Firstly, this question type is known as "Resolve the Paradox".
It has two features:
1) No conclusion
2) The facts or premises stated usually contradict each other.

Secondly,
For this kind of question type you should always consider answer choices as true which means the stimuli is under investigation. Also we dont have to disapprove any of the facts stated in the Stimuli, we just have to resolve, rather find an answer choice which can explain both the situations in a perfect manner.

With the above steps you can easily eliminate all the answer choices except A

If you look answer choice A, it resolves the paradox perfectly keeping all the ends attached.

"Sales of higher-priced houses were unaffected by the sales drop because their purchasers have fewer constraints limiting the total amount they pay."

This means the sales drop in the housing market holds no relevance to sale of higher priced house. And that is exactly whats been asked in the question.

Let me know if you still have any doubts.

I have a query regarding this question so I thought that perhaps it'll be helpful to reactivate this old thread...

How are new houses related to "higher" priced houses?

The stimulus is talking about new houses and NOT higher priced houses, unless I missed a point.

The question is also asking to resolve the paradox for "new houses" and not higher priced houses.

Can someone shed more light on this ?

Thanks !

IMO A.

my reasoning:

from question stem,
1. total number of new houses sold has dropped
2. average price of new houses sold has sharp rise

from choice A,
high end buyers not affected by intrest change ==> means they went on with their usual rate of purchase. that would explain the sharp increase in the average.


for example , till the market slide , if 6 moderate /low-end houses (100K each ) and 2 high end houses( 500K each) were sold . it would make the average price per house sold to be 1600K / 8 ==> 200K

considerign the same market after the intrest rate change.... as by choice A , high-end buyers were not affected, so presumably the sale would be --> 0 low-end houses and 2 high end houses , that would make the average per house sold to be 1000K/2 --> 500K.

that would explain the sharp increase in average price of new houses sold.

I also go with answer A

I also go with answer A