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Have you already worked these two rows once? The pattern assumes that you started with 25sts, then worked these two rows and ended with 23sts.
"Next row: k3, p1, k2, s1, k1, psso, knit to last 3 sts, k2tog, k1. 23sts
Next row: purl to the last 5 sts, k1, p4. These 2 rows set neck and raglan shapings"
On the next 10 rows, dec at the neck edge on rows 3 and 7.
Dec on the raglan edge on rows 1,3,5,7,9.
That'll be a total of 7 decreases and take you from 23 to 16sts.