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Reading Passage Question
Although it is an imperfect model for describing a complex market, the theory of supply and demand is a reasonably accurate method of explaining, describing, and predicting how the quantity and price of goods fluctuate within a market. Economists define supply as the amount of a particular good that producers are willing to sell at a certain price. For example, a manufacturer might be willing to sell 7,000 sprockets if each one sells for $0.45, but would be willing to sell substantially more sprockets, perhaps 12,000, for a higher price of $0.82. Conversely, demand represents the quantity of a given item that consumers will purchase at a set price; in the most efficient market, all buyers pay the lowest price available, and all sellers charge the highest price they are able. The intersection of these occurrences is graphically represented in supply and demand curves that show the prices at which a product becomes too expensive or too readily available.
‘Although it is an imperfect model for describing a complex market’ is a GMAT reading comprehension passage with answers. Candidates need a strong knowledge of English GMAT reading comprehension.
This GMAT Reading Comprehension consists of 7 comprehension questions. The GMAT Reading Comprehension questions are designed for the purpose of testing candidates’ abilities in understanding, analyzing, and applying information or concepts. Candidates can actively prepare with the help of GMAT Reading Comprehension Practice Questions.
Solution and Explanation
- Which one of the following best expresses the main idea of the passage?
- explaining why buyers in a given market tend to seek the lowest price on available goods
- offering a dissenting perspective on an obsolete economic model
- persuading readers that the model of supply and demand is the best method for understanding market forces
- providing an explanation of the two primary elements of an economic model and how they intersect
- analyzing the fluctuation of supply and demand within a market
Answer: D
Explanation: This passage is trying to explain the economics of the market in an easy to understand way. It has mentioned about the supply and demand model which overall describes the fluctuations in the price of the market. Therefore it can be deduced that option D is the correct choice.
- If the producer of sprockets nearly doubles its prices as described in the passage, it follows that
- buyers in the market will be likely to purchase more of the sprockets being sold.
- the price of sprockets will continue to increase.
- buyers in the market will be likely to purchase fewer of the sprockets being sold.
- I only
- II only
- III only
- I and II only
- II and III only
Answer: C
Explanation: If the prices of sprockets will be increased then people will be less likely to purchase the goods, hence I am not correct. It cannot be inferred that the sprockets’ price will continue to rise. But if prices double then buyers will be less likely to purchase goods. C is the correct choice.
- Select the sentence in the passage that illustrates an abstract concept presented by the author.
- The first sentence
- The second sentence
- The third sentence
- The fourth sentence
- The fifth sentence
Answer: C
Explanation: In the third sentence, the author has given an example that clearly illustrates the abstract concept. It explains that if the buyers buy the goods at a higher price, sellers will be able to produce more of the goods. C is the correct choice.
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