Because of steep increases in the average price per box of cereal over

Question

Because of steep increases in the average price per box of cereal over the last 10 years, overall sales of cereal have recently begun to drop. In an attempt to improve sales, one major cereal manufacturer reduced the wholesale prices of its cereals by 20 percent. Since most other cereal manufacturers have announced that they will follow suit, it is likely that the level of overall sales of cereal will rise significantly.

Which of the following would it be most useful to establish in evaluating the argument?

(A) Whether the high marketing expenses of the highly competitive cereal market led to the increase in cereal prices

(B) Whether cereal manufacturers use marketing techniques that encourage brand loyalty among consumers

(C) Whether the variety of cereals available on the market has significantly increased over the last 10 years

(D) Whether the prices that supermarkets charge for these cereals will reflect the lower prices the supermarkets will be paying the manufacturers

(E) Whether the sales of certain types of cereal have declined disproportionately over the last 10 years

ID: 500399

06654-D

akhil911 · Accepted Answer

I approach the evaluate questions by following a simple technique - determine whether the answer choice is going to strenghthen or weaken the conclusion in concrete terms - YES or NO.
If the answer choice is either of the two that is going to help the argument and give us an answer.
Applying the technique above to this question:

Conclusion - Reduction in wholesale prices will have an effect on increase in sales due to more spending by the consumers on cereals.
Some pre thinking steps:
1. What if the consumer does not get the benefit of the wholesale prices and still pays the price as he was paying before.
Answer to this would help us evaluate the argument.
2. What if the consumer does not buy wholesale cereals and only buys from retail - then too the argument would give us our answer.

Applying the technique here:

A. Whether the high marketing expenses of the highly competitive cereal market led to the increase in cereal prices
- no effect

B. Whether cereal manufacturers use marketing techniques that encourage brand loyalty among consumers
- no effect

C. Whether the variety of cereals available on the market has significantly increased over the last 10 years
- no effect

D. Whether the prices that supermarkets charge for these cereals will reflect the lower prices the supermarkets will be paying the manufacturers
- Bingo , if the benefit is not getting passed over to the end user the prices will not reduce

E. Whether the sales of certain types of cereal have declined disproportionately over the last 10 years 
- no effect

rjacobsMGMAT · Answer

(D). This is a classic logic gap: the argument assumes that wholesale price is linked to sale price. Notice how the GMAT disguises the gap: by using the word "price" twice to make us think these concepts are the same.

PUNEETSCHDV · Answer

D. Whether the prices that supermarkets charge for these cereals will reflect the lower prices the supermarkets will be paying the manufacturers

high prices >>> drop in sales

whole sale price dropped

high sale only if it results in lower price to consumer

thevenus · Answer

in 54 secs

D. Whether the prices that supermarkets charge for these cereals will reflect the lower prices the supermarkets will be paying the manufacturers

The manufacturers reduced the price so that the end users(customers) will find it cheap and hence the sale will grow, but if the supermarkets(intermediaries) doesn't sell the cereals at the reduced rate then the plan will fail.
so (D) wins.

grandtheman · Answer

Although d) appears to be the right answer, as per the explanation above, I previously concerned the overall demands of cereal that it may have dropped and unlikely to rebound shortly, since steep increases in average price per box of cereal has an effect over 10 years. The overall sales might take some time to rebound.

jlgdr · Answer

Yes Mr. Jacobs, I noticed that but on the other hand, one needs to assume that people by on supermarkets rather than in other distribution channels. I believe this type of assumption is acceptable and by no means is going to far out, but still, one could clarify this much better in the given question

Cheers
J

AKG1593 · Answer

Option D.
There is a gap in the argument:wholesale prices have declined-->sales will increase.
The intermediaries have been ignored ie the retailers and distributors.
Option D takes that into account.

Posted from my mobile device

Lucky2783 · Answer

Hi thevenus,

noticed that you began your reasoning with 'in 54 secs' , that's really impressive timings. 
how did you reach to such a level of reading and comprehending and then reasoning ? 
any tips for newbies?

thanks
lucky

2016MBAcandidate · Answer

D: Whether the prices that supermarkets charge for these cereals will reflect the lower prices the supermarkets will be paying the manufacturers
a.YES-strengthen the conclusion
b.NO-weaken the conclusion

D is the right answer

schazamhuzzah · Answer

I am stunned no one has selected/discussed 'A'

I think A gives a scenario of increasing prices (which according to the argument should decrease sales)
Whereas D talks only about supermarkets which could just be a subset of all sellers.

How did everyone manage to eliminate A. Can you pls point this out to me?

alwaysnewbie · Answer

Answer choice A gives a probable reason why the prices have increased over a period of 10 years. Nothing about how likely is the plan of the manufacturers to improve sales works out.
The answer choice (question to ask to evaluate) should be something that should question the validity of the conclusion which the manufacturers made i.e., "likely that the level of overall sales of cereal will rise significantly, because of a wholesale price cut of 20%"
Answer choice D is the only one that questions this conclusion.

Skywalker18 · Answer

Because of steep increases in the average price per box of cereal over the last 10 years, overall sales of cereal have recently begun to drop. In an attempt to improve sales, one major cereal manufacturer reduced the wholesale prices of its cereals by 20 percent. Since most other cereal manufacturers have announced that they will follow suit, it is likely that the level of overall sales of cereal will rise significantly.
 
Type - evaluate
Boil it down - cereal manufacturer will decrease wholesale price of its cereals by 20% --> boost overall sales

A. Whether the high marketing expenses of the highly competitive cereal market led to the increase in cereal prices - Irrelevant - we are not concerned about the reason that led to increase in prices at the first place

B. Whether cereal manufacturers use marketing techniques that encourage brand loyalty among consumers- Irrelevant

C. Whether the variety of cereals available on the market has significantly increased over the last 10 years- Irrelevant

D. Whether the prices that supermarkets charge for these cereals will reflect the lower prices the supermarkets will be paying the manufacturers

high prices >>> drop in sales

whole sale price dropped

high sale only if it results in lower price to consumer

E. Whether the sales of certain types of cereal have declined disproportionately over the last 10 years - Irrelevant

Answer D

aaba · Answer

right, when ones read the options too quickly, all options look same.

A. Whether the high  marketing expenses  of the highly competitive cereal market led to the increase in cereal prices

B. Whether cereal manufacturers use  marketing techniques that encourage brand loyalty  among consumers

C. Whether the  variety of cereals available  on the market has significantly increased over the last 10 years

D. Whether the prices that supermarkets charge for these cereals will reflect the lower prices the supermarkets will be paying the manufacturers

E. Whether the sales of certain types of cereal have declined disproportionately  over the last 10 years

jaisonsunny77 · Answer

Type: Evaluate the argument (conclusion). 
 
 Conclusion: it is likely that the level of overall sales of cereal will rise significantly.
  
(A) Whether the high marketing expenses of the highly competitive cereal market led to the increase in cereal prices  -  what ''led'' to the increase in cereal prices is irrelevant to the conclusion drawn.  
 
(B) Whether cereal manufacturers use marketing techniques that encourage brand loyalty among consumers  -  knowing the ''marketing techniques'' does not help us establish/weaken the conclusion.  
 
(C) Whether the variety of cereals available on the market has significantly increased over the last 10 years  -  the variety of cereals is irrelevant to the passage.

(D) Whether the prices that supermarkets charge for these cereals will reflect the lower prices the supermarkets will be paying the manufacturers - if the answer is yes, then it would imply that reducing wholesale prices would ultimately lead to lower purchase prices for consumers, a new price level that should lead to increased sales. If the answer is no, then it would imply that the purchase prices for consumers will still remain high and hence the overall sales will not increase. Therefore, (D) helps us evaluate the argument. Hence,  (D) is the right answer choice. 
  
(E) Whether the sales of certain types of cereal have declined disproportionately over the last 10 years  -  irrelevant.

si.alaoui · Answer

I see it almost like an assumption. So the plan is wholesales price ↓ will lead to sales ↑ (costumers buyings from supermarkets ↑) . What was the assumption ?

The prices that Supermarkets charge for these cereals will reflect the lower prices of Wholesales MAKES SENS. THIS assumption is required to encourage buyers in supermarkets and therefore have sales increasing ...

Also usually in assumption, we go by validation so if we negate : to say if not THIS happening would my argument still work ?

So here the logic is if the supermarkets will not reduce the price the sales will not increase...

05Harini · Answer

Answer: (D)
Explanation:
The argument concludes that  overall cereal sales will rise significantly  because manufacturers are reducing wholesale prices by 20%, and others will follow.
 However, this conclusion assumes that the price reduction at the manufacturer level will actually lead to lower prices for consumers.
If supermarkets do not pass on the lower wholesale prices to customers (for example, by keeping prices the same to increase their margins), then consumers will not face lower prices, and sales may not increase at all.
Therefore, it is most useful to establish whether the prices that supermarkets charge consumers will reflect the lower prices they pay manufacturers, which is exactly what option (D) addresses.
Why others are less useful:
(A) Explains  why  prices rose earlier, not whether sales will now increase.
(B) Brand loyalty does not directly determine whether lower prices increase overall sales.
(C) Variety changes do not test the key assumption about prices and sales.
(E) Focuses on specific cereal types, not overall market sales.
Hence, (D) is the correct answer.

guddo · Answer

D.

The argument assumes lower wholesale prices will lead to lower shelf prices for consumers. If supermarkets do not pass the cuts through, customers may not see cheaper cereal, so overall sales may not rise.

nandini14 · Answer

Why can't A be the answer? What could be the reasoning for A?

guddo · Answer

(A) is tempting because it talks about why cereal prices increased in the first place.

But the argument is not asking, “Why did cereal become expensive?” It is asking whether the manufacturers’  wholesale price cut  will increase overall sales.

For sales to rise, consumers must see lower prices at supermarkets. If supermarkets do not lower the shelf price, customers have no reason to buy more cereal.

So even if (A) is true, it only explains the past price increase. It does not tell us whether the current wholesale price reduction will reach consumers.

That is why (D), not (A), is the key issue:  wholesale price must affect retail price  for the argument to work.

Because of steep increases in the average price per box of cereal over

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