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In the year following an eight-cent increase

This topic has 1 member reply

In the year following an eight-cent increase

Post Sat Dec 02, 2017 4:03 am
In the year following an eight-cent increase in the federal tax on a pack of cigarettes, sales of cigarettes fell ten percent. In contrast, in the year prior to the tax increase, sales had fallen one percent. The volume of cigarette sales is therefore strongly related to the after-tax price of a pack of cigarettes.

Which of the following, if true, would most strengthen the argument above?

A. During the second year after the tax increase, cigarette sales increased by a significant amount.
B. The information available to consumers on the health risks of smoking remained largely unchanged in the period before and after the tax increase.
C. Most consumers were unaware that the tax on cigarettes was going to increase.
D. During the year following the cigarette tax increase, many consumers had less income, in inflation-adjusted dollars, than they had had in the previous year.
E. During the year after the tax increase, there was a greater variety of cigarettes on the market than there had been during the previous year.

Why isn't Option A the best Option?

OA B

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Marty Murray Legendary Member
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Post Sat Dec 02, 2017 10:47 am
lheiannie07 wrote:
Why isn't Option A the best Option?
Conclusion of the Argument: The volume of cigarette sales is therefore strongly related to the after-tax price of a pack of cigarettes.

The logic of the argument depends on the economic law of demand for a normal good. When the price of a normal good increases, demand decreases, and this case fits that pattern.

The argument supports the conclusion, that cigarette sales volume is strongly related to price, by saying that after the price of cigarettes increased, sales of cigarettes decreased by ten percent.

Now let's look at choice A.

A. During the second year after the tax increase, cigarette sales increased by a significant amount.

There is a clear reason why this choice doesn't strengthen the argument.

The argument uses the decrease in sales that follows the increase in after-tax price as evidence that volume of cigarette sales is strongly related to the after-tax price of a pack of cigarettes. So, that pattern, price up - sales down, is the price and sales relationship upon which the argument is based.

Choice A says that the next year cigarette sales increased, but it doesn't say that the after-tax price changed.

Given what we know about the after-tax price of cigarettes, if we are going to stick with the price up - sales down pattern upon which the argument is based, sales should have either continued to decrease, as the tax increase further affected sales, or remained the same, with the effects of the tax being the same as they were the previous year. Instead, sales increased.

We have no information that would logically tie this increase in sales to the price of cigarettes. As far as we know, the price remained the same, but sales increased. So, what this choice says does not add support to the idea that cigarette sales volume is closely related to the price of cigarettes.

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