I just wanted to give my own analysis on this question. I chose (E) from a slightly different line of reasoning than above.
Public should be encouraged to eat foods with lower butterfat
+
"Imitation" deters many people from purchasing it
→
We should allow manufacturers to call "imitation" butter "lite" butter instead
The argument is implying that, because we know that "imitation" butter actually has less cholesterol (therefore, potentially healthier) and because we should encourage people to eat healthier, then we should switch "imitation" butter to a more appealing name; i.e. "lite" butter.
The LSAT has a tendency to give us a plan and then ask us to weaken it. How do we weaken it typically? We show how that plan can backfire. I was thinking that maybe people would actually think "lite" butter was 100% healthy and would eat a lot of it to their own detriment. Either way, I was thinking that calling it "lite" would have disastrous consequences.
(A) We don't care why they are motivated to do what they do.
(B) This would actually really strengthen the argument! If they want to change the name to "lite" and actually make it healthier (well, at least more watered down) then that would be all the more reason to let them!
(C) So some people are not deterred from "imitation." So what? Does that mean we should call it "lite?" Maybe. However, this isn't really a strong answer choice both for its scope ("some individuals who are X feel a certain way...") but also for the fact that its fairly non consequential. It doesn't help me answer the question, "should they be allowed to call it 'lite' butter?"
(D) This is kind of a tempting answer. I was seeing a link between cholesterol and how the product is marketed. However, all this is saying is that there are many factors that lead people to high cholesterol. This answer is very meh. It would be much better if it more directly related to cholesterol for the people consuming the butter.
(E) This shows the plan backfiring. If we call it "lite" butter than maybe people will actually switch to "lite" butter even though they were eating a healthier alternative anyway! In another words, we accept the premises that we should encourage people to eat healthier but this would directly contradict that because it would perhaps cause people to eat unhealthier.