Hi LSAT-Learner!
Happy to address why answer choice (E) is incorrect. Since this is a flaw in the reasoning type of question, it's important to break the stimulus down into premises and conclusions to see what the author's argument is, and where the holes in it are. The author makes the following conclusion (the word "so" often suggests a conclusion, much like "thus" or "therefore"):
Conclusion: "So crime is not adversely affecting my business by reducing the number of people willing to shop at my store."
How does the author arrive at this conclusion? The author uses two premises in support of this conclusion, the first explicitly stated and the second an implicit assumption:
P1: "Every day I talk to people who shop at my store, and they tell me that they are not worried."
(P2): Customers not worried No reduction in total number willing to shop at store
In other words, the business owner is saying that crime hasn't caused a reduction in numbers at the store and backs this up by noting that those shopping at the store aren't afraid (if they're not afraid, then no reduction in numbers). While the store's current customers might not be dissuaded by crime, however, this line of reasoning fails to take into consideration the possibility that
other people who are not yet customers might be dissuaded and not shop at the store. If this were true, then the business owner's conclusion does not follow--crime might still be adversely affecting the business by reducing the number of people willing to shop there.
Answer (E) states that the flaw is that the argument "fails to consider that crime might affect the neighborhood negatively without affecting businesses negatively." This answer is problematic because it does not get to the author's conclusion, which is about numbers (numbers of people who shop at the store). The author doesn't appear to assume one way or another as to whether crime might affect neighborhoods negatively without affecting businesses negatively--this could be true (or false), but either way, one would still be left wondering as to the particular steps that the author/business owner makes in this argument, namely, of assuming that no reduction in existing customers means no reduction in overall numbers. Such argumentation, again, fails to consider that crime might be dissuading new visitors from frequenting the store.