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law of demand

by gmatjeet » Fri Jul 29, 2011 3:22 am
The law of demand states that,if all other factors remain equal,the higher the price of a good,the less people will consume that good. In other words,the,higher the price,the lower the quantity demanded.This principle is illustrated when.........................
(A) Company A has a monopoly over the widget market so an increase in widget prices has little effect on the quantity demanded
(B)a manufacturer of luxury cars noticed that its customer base is relatively unresponsive to changes in price
(C)the recent increase in gas prices caused an increased demand for fuel-efficient cars
(D)an increase in the number of computer retailers led to a decrease in the average price of computers
(E) a reduction in the price of oranges from $2 per pound to $1 per pound results in 75 pounds of oranges being sold as opposed to 50 pounds

OA: E

Query: In the argument, only statement made is " Higher the price , lower the quantity demanded".

In option E, the reverse is explained as an example.

Are we not assuming that arguement's opposite is always going to be true.

Can we make such assumptions on the question?

Thanks in advance.
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by sandy217 » Fri Jul 29, 2011 5:07 am
gmatjeet,

Whats the source ??

A,B state ...effect is not true ; Hence out
D talks about something else ; Out
C, convoluted. Can i say increase in fuel prices prompted a decrease in demand for normal cars?If yes, it can be the answer
E as u said reverses , I am not sure whether that assumption is warranted !!
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by gmatjeet » Fri Jul 29, 2011 7:11 am
Q is from manhattan cr guide
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by dinaroneo » Fri Jul 29, 2011 8:58 pm
Hey gmatjeet,
I think
Reversal of the argument stated wil be : reduced consumtion causes hike in price or can also say 'inc in consumption causes reduction in price'

where as the statement 'reduced prices cause increase in consumption' is same as saying 'increas in prices cause reduction in consumption'.
That means
if inc in x causes dec in y
reverse is: dec in y causes inc in x (the cause - effect relationship)
but not dec in x causes inc in y
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by lunarpower » Mon Aug 01, 2011 2:37 pm
dinaroneo wrote:Hey gmatjeet,
I think
Reversal of the argument stated wil be : reduced consumtion causes hike in price or can also say 'inc in consumption causes reduction in price'

where as the statement 'reduced prices cause increase in consumption' is same as saying 'increas in prices cause reduction in consumption'.
That means
if inc in x causes dec in y
reverse is: dec in y causes inc in x (the cause - effect relationship)
but not dec in x causes inc in y
well, note that there is no mention of cause and effect in the argument -- the argument basically just states that there is a negative correlation between the two quantities.
in a correlation, it doesn't matter which way you state it -- "increase in X correlates with decrease in Y" is exactly the same thing as "decrease in X correlates with increase in Y". (the same would be true for increase/increase and decrease/decrease, in the case of a positive correlation.)

by the way, if there *were* a cause-and-effect statement in the argument (which, remember, there's not), then reversing that statement would NOT produce another cause-and-effect statement.
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by dinaroneo » Tue Aug 02, 2011 7:16 am
Thanks Ron for correcting my perspective!
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by polter » Tue Aug 02, 2011 7:54 am
Hi Ron,

How can we distinguish between the 2 cases, viz. correlation & cause-effect.

Since to me, "increase in X correlates with decrease in Y" = if X increases (cause) then Y decreases (effect).
Besides does is it necessary that "increase in X correlates with decrease in Y" is exactly the same thing as "decrease in X correlates with increase in Y".
It can be that "increase in X correlates with decrease in Y" but "decrease in X does not increase Y".

Logically (GMAT world) this is possible right? Though I would think this to be almost impossible practically.
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by MUC9B830 » Tue Aug 02, 2011 8:01 am
lunarpower wrote:
dinaroneo wrote:Hey gmatjeet,
I think
Reversal of the argument stated wil be : reduced consumtion causes hike in price or can also say 'inc in consumption causes reduction in price'

where as the statement 'reduced prices cause increase in consumption' is same as saying 'increas in prices cause reduction in consumption'.
That means
if inc in x causes dec in y
reverse is: dec in y causes inc in x (the cause - effect relationship)
but not dec in x causes inc in y
well, note that there is no mention of cause and effect in the argument -- the argument basically just states that there is a negative correlation between the two quantities.
in a correlation, it doesn't matter which way you state it -- "increase in X correlates with decrease in Y" is exactly the same thing as "decrease in X correlates with increase in Y". (the same would be true for increase/increase and decrease/decrease, in the case of a positive correlation.)

by the way, if there *were* a cause-and-effect statement in the argument (which, remember, there's not), then reversing that statement would NOT produce another cause-and-effect statement.

Hi Ron,
thanks for the explanations. Can you please explain why option C is wrong?
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by bubbliiiiiiii » Tue Aug 02, 2011 10:57 pm
Hey,

Initially I also picked C. But eventually, I understood that E, unlike C, is more appropriate because it requires no additional assumptions. While C needs an assumption that vehicle market already exists and people due to increase in price are compensating the demand by switching ti fuel efficient cars.

Hope it helps.

Ron, please correct if I am wrong.
Regards,

Pranay
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by gmat25 » Tue Aug 02, 2011 11:19 pm
What kind of question stem is this???? I mean this question falls in which category??? assumption/inference....etc etc???
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by lunarpower » Thu Aug 04, 2011 3:34 am
gmat25 wrote:What kind of question stem is this???? I mean this question falls in which category??? assumption/inference....etc etc???
in our strategy guide, this problem is classified as "provide an example". this is a very minor problem type; you are rather unlikely to encounter it on the exam. (hence, it is presented in a catch-all chapter on "minor problem types".)

why so many question marks?
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by sss2534 » Thu Aug 04, 2011 5:08 pm
lunarpower wrote:
gmat25 wrote:
in our strategy guide, this problem is classified as "provide an example". this is a very minor problem type; you are rather unlikely to encounter it on the exam. (hence, it is presented in a catch-all chapter on "minor problem types".)
Hey Ron,

This question is unrelated to this discussion -- but I was wondering if Manhattan is planning to write an advanced gmat verbal book in the near future? I own the advanced quant book -- and it's a fantastic resource. I am sure an advanced verbal guide will be an excellent supplement. Any chance something along that line is in the works?
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by lunarpower » Fri Aug 05, 2011 3:00 am
sss2534 wrote:This question is unrelated to this discussion -- but I was wondering if Manhattan is planning to write an advanced gmat verbal book in the near future? I own the advanced quant book -- and it's a fantastic resource. I am sure an advanced verbal guide will be an excellent supplement. Any chance something along that line is in the works?
i don't know of any plans for such a thing, but there are also lots of different moving parts in our company -- i.e., i don't know everything about every planned venture.
if you call or e-mail student services, they may be able to give you a little bit more texture on this sort of thing.
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by mundasingh123 » Fri Aug 05, 2011 4:57 am
lunarpower wrote:
dinaroneo wrote:Hey gmatjeet,
I think
Reversal of the argument stated wil be : reduced consumtion causes hike in price or can also say 'inc in consumption causes reduction in price'

where as the statement 'reduced prices cause increase in consumption' is same as saying 'increas in prices cause reduction in consumption'.
That means
if inc in x causes dec in y
reverse is: dec in y causes inc in x (the cause - effect relationship)
but not dec in x causes inc in y
well, note that there is no mention of cause and effect in the argument -- the argument basically just states that there is a negative correlation between the two quantities.
in a correlation, it doesn't matter which way you state it -- "increase in X correlates with decrease in Y" is exactly the same thing as "decrease in X correlates with increase in Y". (the same would be true for increase/increase and decrease/decrease, in the case of a positive correlation.)

by the way, if there *were* a cause-and-effect statement in the argument (which, remember, there's not), then reversing that statement would NOT produce another cause-and-effect statement.
Hi Ron,
C is also a valid answer .
When the gas prices increase , people begin to think of using less of it . they start conserving gas and demanding fue efficient vehicles. I has to pick a lottery between C and E
I Seek Explanations Not Answers
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by lunarpower » Mon Aug 08, 2011 1:26 am
mundasingh123 wrote: When the gas prices increase , people begin to think of using less of it . they start conserving gas and demanding fue efficient vehicles. I has to pick a lottery between C and E
(c) is not a direct illustration of the principle. with that subject material, there are only two possible direct illustrations: (a) gas prices and gas sales move in opposite directions, or (b) vice versa.
by introducing the topic of fuel-efficient vehicles -- a topic that is an irrelevant digression from the law illustrated -- you have ceased to provide a relevant illustration.
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