GMAT Essays (AWA)

The following appeared as part of an article in a weekly news magazine.
"The country of Sacchar can best solve its current trade deficit problem by lowering
the price of sugar, its primary export. Such an action would make Sacchar better
able to compete for markets with other sugar-exporting countries. The sale of
Sacchar's sugar abroad would increase, and this increase would substantially
reduce Sacchar's trade deficit."
Discuss how well reasoned... etc.

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Thought it might seem at first glance that the author might have a good reason for suggesting that the best solution to Sacchar's current trade deficit problem is lowering the price of sugar, a closer examination of the argument reveal numerous examples of leaps of faith and poor reasoning.

The argument is based on several unsupported assumptions and therefore fails to be persuasive.

The argument for reducing price of sugar to solve the trade deficit problem is rooted in the assumption that a reduction of price will not be greeted with a similar price reduction by other sugar exporting countries. However the author provides no evidence to support this key assumption. Without evidence that suggests favorable reactions by competitors to such price reductions or any trade agreement that prevents other competitors for reducing price we can't assume that Sacchar will be better able to compete for markets with other sugar-exporting countries.

Additionally, the author believes that a price reduction would lead to increase sales suggesting that market for sugar is price elastic.This ignores the possibility that the sugar market might be price inelastic leading to a decrease in revenue and at the same time not increasing its sales, hence failing to reduce the trade deficit.


The author also assumes that only by lowering the price of Sugar can Sacchar compete with other sugar-exporting countries.There may be other factors such as quality of sugar, duration of the presence of other countries in the market, and marketing strategies, which could be affecting the sale of Sacchar's sugar abroad.

To make this argument persuasive the author needs to present specific evidence to support the arguments assumptions. For instance details regarding sugar market behavior and the competitors reactions to price reductions would help rule out some alternative possibilities allowing an accurate evaluation of the merits and demerits of the suggested course of action.

Taken as a whole these unstated assumption render the argument highly suspect. Indeed If these assumptions don't hold true, then the argument falls apart.