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another tricky CR - i dont get it

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another tricky CR - i dont get it

by san2009 » Tue Aug 10, 2010 12:36 pm
A company offers a new model of its product every year, setting the new model's price by adding a fixed percentage (based on the rate of inflation) to the price of the previous year's product. Thus, the company's pricing remains appropriate.

Which of the following, if true, might illustrate a flaw in this pricing method?


(A) Changes in the design or manufacture of the product might affect its market value or production cost. correct

(B) Inflation rates have varied dramatically in the past decade.

(C) The cost of the components used to manufacture the company's product can vary from year to year. your answer

(D) Customers who already own the company's product are very unlikely to purchase a new model.

(E) The pricing method might discourage the development of an innovative new product line.
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by SeemaSkl » Tue Aug 10, 2010 2:02 pm
A company offers a new model of its product every year, setting the new model's price by adding a fixed percentage (based on the rate of inflation) to the price of the previous year's product. Thus, the company's pricing remains appropriate.

Which of the following, if true, might illustrate a flaw in this pricing method?


(A) Changes in the design or manufacture of the product might affect its market value or production cost. correct

(B) Inflation rates have varied dramatically in the past decade.

(C) The cost of the components used to manufacture the company's product can vary from year to year. your answer

(D) Customers who already own the company's product are very unlikely to purchase a new model.

(E) The pricing method might discourage the development of an innovative new product line.

Premise: Pricing is determined by inflation and previous years cost.
Conclusion: Pricing method is inappropriate

You task here is to bridge the gap between premise and conclusion by assuming and the assumption will be that other
variables that determine cost remain constant. Choice A negates that conclusion and hence weaken the argument.

Hope this helps in understanding.
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by beatthegmatinsept » Tue Aug 10, 2010 2:54 pm
I was tempted to pick C as well, but on a closer look C is really a subset of A.
That is, A talks about the production cost just as C does, BUT A also talks about the changes in production costs resulting due to changes in the design of the product. So you pick A, since A is more complete.
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by missrochelle » Tue Aug 10, 2010 8:15 pm
Conclusion: Pricing method is inappropriate

--- isnt the conclusion that the pricing method IS appropriate? And we are weaking that conclusion ? (i.e. it's inappropriate because other factors can affect pricing..)
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by paes » Wed Aug 11, 2010 4:46 am
Please don't write the answer with the choice.
As you have done here with A.

It kills the thought process of others.
give answer choice or your query under spoiler only.
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by arora007 » Wed Aug 11, 2010 6:09 am
san2009 wrote:A company offers a new model of its product every year, setting the new model's price by adding a fixed percentage (based on the rate of inflation) to the price of the previous year's product. Thus, the company's pricing remains appropriate.

Which of the following, if true, might illustrate a flaw in this pricing method?


(A) Changes in the design or manufacture of the product might affect its market value or production cost. correct

(B) Inflation rates have varied dramatically in the past decade.

(C) The cost of the components used to manufacture the company's product can vary from year to year. your answer

(D) Customers who already own the company's product are very unlikely to purchase a new model.

(E) The pricing method might discourage the development of an innovative new product line.

The answer is A, it was clear to me as soon as I read it..a good contender....
and even liked it when you gave the answer CORRECT!!

Since u gave the question in your way.... the explanation is going to come now in my way...

Its like last year... TATAs launched the TATA Nano a BIG flop... (share prices reduces....) this year... TATA's lauched the JaguarLandrover brought profits.. (stocks have zoomed 13% in 2 days)

price of tata nano is .1 million Rs. and JLR 3.5 million Rs. inflation in India was thankfully not 3500% it was that the last year's product and this year's product were different!
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by SeemaSkl » Wed Aug 11, 2010 6:48 am
missrochelle, my bad i made a typo there.
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by FightWithGMAT » Wed Aug 11, 2010 7:42 am
san2009 wrote:A company offers a new model of its product every year, setting the new model's price by adding a fixed percentage (based on the rate of inflation) to the price of the previous year's product. Thus, the company's pricing remains appropriate.

Which of the following, if true, might illustrate a flaw in this pricing method?


(A) Changes in the design or manufacture of the product might affect its market value or production cost. correct

(B) Inflation rates have varied dramatically in the past decade.

(C) The cost of the components used to manufacture the company's product can vary from year to year. your answer

(D) Customers who already own the company's product are very unlikely to purchase a new model.

(E) The pricing method might discourage the development of an innovative new product line.
The author assumed that the production cost remains same.
A and C both say that the production may vary. But, as somebody mentioned earlier that C is a subset of A.
So we have a big point to attack the conclusion.
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by uwhusky » Wed Aug 11, 2010 9:54 am
This question is someone's attempt at replicating OG Verbal Guide's question, but I don't know if he/she did a sufficient job at expressing the idea. Probably best to move on from this question.
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