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Please explain the answer

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gmatrant Master | Next Rank: 500 Posts Default Avatar
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Please explain the answer

Post Wed Nov 07, 2007 11:28 pm
Elapsed Time: 00:00
  • Lap #[LAPCOUNT] ([LAPTIME])
    The program to control the entry of illegal drugs into the country was a failure in 1987. If the program had been
    successful, the wholesale price of most illegal drugs would not have dropped substantially in 1987.
    80. The argument in the passage depends on which of the following assumptions?
    (A) The supply of illegal drugs dropped substantially in 1987.
    (B) The price paid for most illegal drugs by the average consumer did not drop substantially in 1987.
    (C) Domestic production of illegal drugs increased at a higher rate than did the entry of such drugs into the
    country.
    (D) The wholesale price of a few illegal drugs increased substantially in 1987.
    (E) A drop in demand for most illegal drugs in 1987 was not the sole cause of the drop in their wholesale
    price.

    Can someone explain the answer. The answer is E. I couldn't understand the OG explanation.

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    mayonnai5e Legendary Member Default Avatar
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    Post Thu Nov 08, 2007 3:59 pm
    gmatrant wrote:
    The program to control the entry of illegal drugs into the country was a failure in 1987. If the program had been
    successful, the wholesale price of most illegal drugs would not have dropped substantially in 1987.
    80. The argument in the passage depends on which of the following assumptions?
    (A) The supply of illegal drugs dropped substantially in 1987.
    (B) The price paid for most illegal drugs by the average consumer did not drop substantially in 1987.
    (C) Domestic production of illegal drugs increased at a higher rate than did the entry of such drugs into the
    country.
    (D) The wholesale price of a few illegal drugs increased substantially in 1987.
    (E) A drop in demand for most illegal drugs in 1987 was not the sole cause of the drop in their wholesale
    price.

    Can someone explain the answer. The answer is E. I couldn't understand the OG explanation.
    Let's think about a normal market place.

    Supply Side: When do prices go up? When supply is down. When do prices go down? When there is an oversupply and sellers reduce prices to get more business.

    Buy Side: When do prices go up? When demand increases and buyers bid up the price. When do prices go down? When demand falls and buyers are less willing to pay a particular price.

    "If the program had been successful, the wholesale price of most illegal drugs would not have dropped substantially in 1987."
    --> This tells us that prices dropped substantially, which tells us something happened on the buy side or supply side to influence the price.

    "The program to control the entry of illegal drugs into the country was a failure in 1987."
    --> The author is suggesting that the problem was an oversupply because unregulated entry would tend to allow lots of drugs to flow into the country
    --> This means the author believes the issue was a supply side problem and not a buy side issue.

    Choice E states the cause was not entirely due to the buy side, which is what the author is assuming here (otherwise the entire price drop could have been due to demand and had nothing to do with supply nor entry control).

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