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# CONFUSING INFERENCE LOGIC

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PriyamRathor

(B) The new tax would produce a net gain in tax revenue for the government only if the yearly total revenue that it generates exceeds the total of any yearly tax-revenue decrease resulting from the workers' loss of jobs.

We know that ...the cost of those products to the buyers, several export-dependent industries in Z, went up, sharply limiting the ability of those industries to compete effectively in their export markets

What we know from the text:
Stated: The govt banned imports of some products
Implied, Definitely true: Anyone who wanted these products had to get them from domestic manufacturers.

Stated: The buyers of the products are several export-dependent industries.
Stated: The cost of these products to the buyers went up as a direct result of the ban.
Stated: (As a result of the import ban) These industries became less able to compete in export markets
Implied, Definitely true: These industries raised their prices.

Implied, Definitely true: (A) Profit margins in those industries were not high enough to absorb the rise in costs mentioned above.

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PriyamRathor wrote:
I am really confused to as what should be the approach to CR Inference Questions.

Your mission on these problems is to PROVE one of the answer choices from the given statements.

A couple of other things to keep in mind on these problems:

• You should have to combine two or more statements from the passage to prove your answer. This is a baseline feature of this problem type. Moreover, it has 2 immediate consequences that can help you solve these problems more efficiently:

CONSEQUENCE 1/ Knowing this functionality gives you a concrete goal for your reading: As you read, watch for pairs of statements that can be logically combined in a straightforward way.

CONSEQUENCE 2/ The correct answer should NOT just be a restatement of one statement from the passage. If an answer choice seems to just restate a single already-given statement, you should expect it to be wrong—probably by misquoting or distorting the statement that it seems to repeat.

Let's take a look at the statements in your Question #1 with the goal of finding ways to logically combine statements:

Quote:
Proponents of the recently introduced tax on sales of new luxury boats had argued that a tax of this sort would be an equitable way to increase government revenue

Right here, we have the ultimate purpose of all this stuff. This tax is aimed at increasing total government revenue (...unsurprisingly; isn't that the point of any tax? hah).

Therefore, as we go through the rest of the givens, we should look for ways to tie statements back to EFFECTS ON GOVERNMENT REVENUE.

Quote:
because the admittedly heavy tax burden would fall only on wealthy people

This means that the only people buying luxury boats are wealthy people.

Quote:
and neither they nor anyone else would suffer any economic hardship.

Aha! "No economic hardship" means that nobody will have to scale back spending or consumption. Therefore, these people will contribute the added tax revenue on boat sales—and won't DECREASE any other spending/consumption activities in any way that would OFFSET that extra tax paid. (1)

Quote:
In fact, however, 20 percent of the workers employed by manufacturers of luxury boats have lost their jobs as a direct result of this tax.

Unemployed people generally have to make drastic cuts to spending/consumption. Therefore, these individuals' job losses will likely have the effect of decreasing tax revenue. (2)

And that's it.

So, only (1) and (2) can possibly have any new effects on government revenue here.

We want an answer choice that follows from THESE observations. Do you see how that's definitely choice B?
Choice B is a direct consequence of our deduction that #1 and #2 are the only things potentially affecting tax revenues.

Quote:
Why can't Choice D be the answer ? Because we are not concerned with what caused the workers lose their jobs.

Choice D is the exact opposite of what we know here. Please see my analysis above: "The tax burden would only fall on wealthy people" can only be true if wealthy people are the ONLY buyers of these boats.
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Now let's have a go at question 2, with the same awareness of how these problems work and the same goal during our reading of the passage (= to find ways to combine multiple statements to prove further ideas).

Quote:
To protect certain fledgling industries, the government of country Z banned imports of the types of products those industries were starting to make.

Okay... Country Z's government banned competing foreign brands of the same types of products made by the domestic industries mentioned here.

Quote:
As a direct result, the cost of those products to the buyers, several export-dependent industries in Z, went up

So these other companies PAID LESS for the same stuff made by the industries described in this color above.

If that's true, then the competing import products must sell for lower prices than these companies' products.. And that's why the price point of those things suddenly jumped when those cheaper imports were banned from entering the country.

Quote:
sharply limiting the ability of those industries to compete effectively in their export markets.

So these companies WERE more competitive with their PREVIOUS balance-sheet values (costs and revenues).
The only thing that's changed for the blue companies is the cost of that one product. So... the new prices that these companies are now paying for those products must be SO MUCH HIGHER that THAT CHANGE ALONE has wiped out color=#0054a6]these companies'[/color] ability to compete on the export market. (1)

Quote:
Which of the following conclusions about country Z's adversely affected export-dependent industries is best supported by the passage?

What do we know about the blue companies? Basically, statement (1). Let's look for an answer choice that follows from statement (1).

Quote:
(A) Profit margins in those industries were not high enough to absorb the rise in costs mentioned above.

Okay, this is pretty much exactly statement 1. Win!

Quote:
I am really confused because how can we infer that since profits margins in those industries were not high to absorb the increased cost , hence they could not compete in foreign market?

Please let me know if you follow the reasoning given above (the reasoning that tracks the given statements one by one).
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PriyamRathor wrote:
Hello Experts,

RonTargetTestPrep
MartyTargetTestPrep
GMATNinja
KarishmaB
ChiranjeevSingh

Following are the two Inference CR question, both have similar reasoning but use different LOGIC.

I am really confused to as what should be the approach to CR Inference Questions.

Question- 1
https://gmatclub.com/forum/proponents-o ... 41472.html
Quote:
Proponents of the recently introduced tax on sales of new luxury boats had argued that a tax of this sort would be an equitable way to increase government revenue because the admittedly heavy tax burden would fall only on wealthy people and neither they nor anyone else would suffer any economic hardship. In fact, however, 20 percent of the workers employed by manufacturers of luxury boats have lost their jobs as a direct result of this tax.

The information given, if true, most strongly supports which of the following?

(A) The market for luxury boats would have collapsed even if the new tax on luxury boats had been lower.

(B) The new tax would produce a net gain in tax revenue for the government only if the yearly total revenue that it generates exceeds the total of any yearly tax-revenue decrease resulting from the workers' loss of jobs.

(C) Because many people never buy luxury items, imposing a sales tax on luxury items is the kind of legislative action that does not cost incumbent legislators much popular support.

(D) Before the tax was instituted, luxury boats were largely bought by people who were not wealthy.

(E) Taxes can be equitable only if their burden is evenly distributed over the entire population.

Fact1: Tax on sales of New luxury boats has been introduced. This heavy tax burden would fall only on wealthy people and neither they nor anyone else would suffer any economic hardship.

Fact2 : 20 % of workers employed by manufactures of luxury boat lost their jobs.

Why can't Choice D be the answer ? Because we are not concerned with what caused the workers lose their jobs.

Pasting GMATNinja reasoning:-
Quote:
Why did they lose their jobs? Perhaps some people who could have afforded a luxury boat without the tax could not afford a luxury boat with the tax, causing sales and, thus, production of luxury boats to decline. Regardless of whether this theory is true, we cannot assume that the people who decided not to buy luxury boats because of the tax were not wealthy. Even if we could, we would not be able to assume that luxury boats were LARGELY bought by people who were not wealthy before the tax was instituted. There is nothing in the passage to support choice (D), so it must be eliminated.

TOTALLY AGREE WITH WHAT Charles is saying.
In Inference Questions we are not supposed to be CRITICAL. Rather we are supposed to see which answer choice can be INFERRED with respect to the STIMULUS.

Question- 2
https://gmatclub.com/forum/to-protect-c ... 12491.html
Quote:
To protect certain fledgling industries, the government of country Z banned imports of the types of products those industries were starting to make. As a direct result, the cost of those products to the buyers, several export-dependent industries in Z, went up, sharply limiting the ability of those industries to compete effectively in their export markets.

Which of the following conclusions about country Z's adversely affected export-dependent industries is best supported by the passage?

(A) Profit margins in those industries were not high enough to absorb the rise in costs mentioned above.

(B) Those industries had to contend with the fact that other countries banned imports from country Z.

(C) Those industries succeeded in expanding the domestic market for their products.

(D) Steps to offset rising materials costs by decreasing labor costs were taken in those industries.

(E) Those industries started to move into export markets that they had previously judged unprofitable.

Fact1: Govt of Country Z banned import of products manufactured by fledging industries

Fact2: Cost of these products to the buyers(EDI) increased and hence it limited their ability to compete effectively in their export markets.

Now here we are choosing an answer which answers the question of "Why did they could not compete in export markets?"

I am really confused because how can we infer that since profits margins in those industries were not high to absorb the increased cost , hence they could not compete in foreign market?

It could be that , these industries were not ready to lower to the prices , hence they could not compete.
It could be that , these industries lowered the quality of products , hence they could not compete in the international market.

TO SUMMARIZE MY QUESTION:-
In question 1 - we say that we are not concerned with why workers lost their JOB
whereas
In question 2 - we are answering why EDI failed to compete in export markets?

On one hand we say that INFERENCE questions doesn't require us to be CRITICAL , on the other hand it is our CRITICAL THINKING which will help us INFER answer in question 2.

We are talking about 'critical reasoning' questions so critical thinking is a must - at ALL times.

In question 1, the reason option (D) is not the answer is that it is not supported by the given information.
All the passage tells us is that because of the tax, 20% employees have lost their jobs. The reason the employees lost their jobs could be many
- perhaps to offset the tax burden, the boat manufacturers decided to reduce their boat prices and hence decided to reduce their costs and make do with fewer employees
or
- perhaps the boats became expensive so fewer people bought them leading to losses to boat manufacturers and hence the lay offs
etc.
All we know from the argument is that tax led to lay offs. Mind you, there are many reasons for 'tax leading to lay offs' and the argument doesn't tell us which one took place.

(D) Before the tax was instituted, luxury boats were largely bought by people who were not wealthy.
Is (D) supported by the argument is any way? No.
Perhaps wealthy people bought boats before tax. But now, the boats are too expensive (not worth the money) for even the wealthy people.
Or perhaps the same people as before are buying the same number of boats because the manufacturer has set off the tax increase by laying off people etc.
We don't know. (D) is not supported and is not the answer.

In question 2, we are given that the cost of the companies went up and this limited their ABILITY to compete.
They were not able to compete (nothing about intention - the ability went away). This means they did not have enough profit margin (only then will it limit their ability). We don't have to infer one situation out of many possible. There is only one possible situation. If they had enough profit margin in the first place, their ability to compete would have been maintained. Whether they would have been willing to compete to not is a different matter.
That is why option (A) makes sense here.
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Thank you ChiranjeevSingh for taking out time to answer this query.
I missed the verb-ing modifier part. Now, after you pointed out, it completely makes sense to me why Cost can be the ONLY reason .
Also, now I won't forget to apply my SC skills in CR for better understanding of the Stimulus.

Quote:
Please let me know if you follow the reasoning given above (the reasoning that tracks the given statements one by one).

Yes RonTargetTestPrep , I follow the reasoning give above.
I have made a note of the TWO CONSEQUENCES that you have mentioned.
Now I will approach every Inference question keeping the TWO CONSEQUENCES in mind.
While practicing ,I will follow your approach of dissecting every part of the stimulus and making logical linkages between two or more statements to arrive to an answer. ( I hope that this approach becomes a second nature to me so that it comes naturally to me while taking exam)

Thankyou KarishmaB.
I will keep this in mind.
Quote:
We are talking about 'critical reasoning' questions so critical thinking is a must - at ALL times.

Thank you vv65