The passage itself is pretty straightforward:
- We have the results of the studies: "the tips left by customers who pay their bill in cash tend to be larger when the bill is presented on a tray that bears a credit-card logo." - notice the use of the word "tend". The psychologists are not suggesting that seeing a credit card (CC) logo on the tray will ALWAYS cause an increase in tip amount. In general, seeing a CC logo results in higher tip amounts.
- And we have an interpretation of those results: "simply seeing a credit-card logo makes many credit-card holders willing to spend more because it reminds them that their spending power exceeds the cash they have immediately available." - notice that this hypothesis only mentions "credit-card holders"
What the heck does that mean? Well, if you have $100 cash in your pocket and don't have any credit cards, then your "spending power" is limited to that cash amount. If you walk into an electronics store and want to buy a fancy television for $1,000, you'll be out of luck.
But what if, in addition to the $100 cash, you have a CC with a $5,000 spending limit? Now your spending power exceeds the amount of cash in your pocket. Sure, you'll have to pay off that credit card in the future, but right now you can walk into that electronics store and buy FIVE of those fancy televisions! The credit card does not actually give you any money, but it certainly increases your present spending power.
So now imagine you are in a restaurant. The bill is $50, and you have $100 cash in your pocket. You decide to leave a 10% tip ($5). But then you notice the credit card logo on the bill tray. This reminds you of the shiny American Express CC in your pocket, and that card has a $5,000 credit limit. You are reminded that your spending power
exceeds the $100 cash that you have. So paying a $50 restaurant bill is not going to take away HALF of your spending power. Instead, it will only take away a small portion of your current spending power.
Reminded that you spending power is not limited to the cash, you might decide to leave an even larger tip (maybe $7-10 instead of $5).
Now that we understand the psychologists’ interpretation of the studies, we need something that supports that interpretation:
Quote:
A. The effect noted in the studies is not limited to patrons who have credit cards.
The hypothesis is that the CC logo reminds people that they have a credit card and thus that they have greater spending power. If (A) is true, then the logos cause higher tips even among people who do NOT have credit cards. In that case, the increase can't be explained by the psychologists' hypothesis. (A) weakens the argument, so eliminate this one.
Quote:
B. Patrons who are under financial pressure from their credit-card obligations tend to tip less when presented with a restaurant bill on a tray with credit-card logo than when the tray has no logo.
According to the psychologists, customers tip more when they are reminded that their spending power exceeds the cash they currently have available. If this is true, then we would expect customers to tip LESS when they are reminded that their spending power is LESS than the cash they currently have available.
Huh? Well, think about a man who is in debt. He might have $100 in his pocket, but he
owes his friend $500. He might have been ready to give a $5 tip, but as soon as he remembers that he owes money, he decides to give $3-4 instead.
Although choice (B) presents a scenario that is the opposite of the one presented in the passage, both scenarios support the same theory, which is that being reminded of your spending power can impact how much you tip.
Generally, this causes people to tip more because they are reminded that their spending power exceeds the cash they have. However, for people in credit card debt, seeing the logo is a reminder that their spending power is actually
lower.
So if choice (B) is true, it would support the psychologists' hypothesis. Keep this one.
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C. In virtually all of the cases in the studies, the patrons who paid bills in cash did not possess credit cards.
As with choice (A), this weakens the argument. The whole idea is that the CC logo reminds you that you have a credit card and, thus, that your spending power is not limited to the cash in your pocket. (C) tells us that the logos caused higher tips even though the patrons did NOT have CC's. This contradicts the hypothesis, so eliminate (C).
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D. In general, restaurant patrons who pay their bills in cash leave larger tips than do those who pay by credit card.
If anything, this might weaken the hypothesis. People who pay with a CC are obviously aware that they have a credit card. If, as the psychologists suggest, having a CC supposedly makes you aware of your expanded spending power, then why don't the people paying with CC's leave larger tips?
The hypothesis can certainly still work even if (D) is true. Maybe cash patrons tend to tip more for some reason that is unrelated to the study. Regardless, if those people tend to tip
even more when they see the CC logo because they are reminded of their expanded spending power, then the psychologists' interpretation would be accurate.
At best, (D) has no impact, but it certainly doesn't strengthen the argument. Eliminate (D).
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E. The percentage of restaurant bills paid with given brand of credit card increases when that credit card’s logo is displayed on the tray with which the bill is prepared.
This evidence suggests that the logos can be effective as advertising tools. If you see the AMEX logo, you might decide to use your AMEX card instead of cash or instead of your Visa card. But how does that impact your tip amount? The hypothesis is not concerned with whether people actually
use CC's. Rather, it is concerned with the cause of the increased tip amounts. (E) is irrelevant.
(B) is the best answer.
Great explanation as usual .
I have one more possible reason to reject E .
People have multiple credit cards so this choice is irrelevant .