Critical Reasoning Forth Edition Q10, pg 98

[saurabhbanerjeeiimk]

The question reads as " In the last year, real estate prices, such as those for houses and condominiums,.."

I went through the explanation, however, not convinced on the following:

If there was actually an increase in both cities, then why is answer choice using the word "decreased" for Galway? Its not really a decrease but a small increment.

Thanks

[tim]

because the RATIO of rents to prices actually HAS decreased. it is possible for two numbers both to increase but the ratio fall, if the denominator increased a greater percentage..

[saurabhbanerjeeiimk]

I tried the math, dint work.

Eg. 8/2 vs 4/7

We still need an older ration to see the trend. Ie. I need to compare the DECREASE to an OLDER RATIO.

Please advice

[jnelson0612]

To make things easier, let's recap what the argument says:

In the last year, two things have happened:
1) real estate prices have gone up 7% in Galway but 2% in Tuam
2) average apartment rents have gone up 4% in Galway but 8% in Tuam.

We are asked to make an inference from these facts.

The correct answer is
A) In the last year, the ratio of average apartment rents to average real estate prices has increased in Tuam but fallen in Galway.

Let's make up some numbers that match the information given in this problem to see how this answer can be correct.

Let's say that last year the average Galway rent was $100 and average Galway real estate price was $1000. The ratio would be 100:1000 or 1:10, which is expressed mathematically as 1/10.

This year the average Galway rent would be $104 and real estate price $1070. We can look at this ratio, 104:1070 and see that it will be LESS than 1/10. Thus, the Galway average rent to average real estate price has decreased.

Let's do the same with Tuam:
Average rent was also $100 and real estate was $1000 last year, or 1/10.

This year rent would be $108 and real estate would be $1020. We can look at this ratio, 108/1020, and see that it is GREATER than 1/10. Thus, the Tuam average rent to average real estate price ratio has increased.

The summary of all of this is exactly what answer choice A) says.

[mail_amit]

Hey,

I just wanted to clarify something.

The real estate prices would significantly be greater than the rental price. So 2% of $200,000 would always be greater than 8% of some $10,000.. Wouldn't this eventually decrease the ratio.

This option can be misinterpreted this way.


I feel that (B) is more probable as an option. Because the rental prices would only increase if the demand is greater than the supply. Even though the supply is low, an increase would only happen when the demand increases.

please correct me if i am wrong.

Thanks,
Amit

[tim]

i don't think you're reading the question properly or interpreting the concept of ratios properly. you also seem to be bringing in outside knowledge into this question, which is one of the surest signs that you've done something wrong..