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655-705 (Hard)|   Evaluate Argument|                           
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^^^^^

But my fundamental question GMATNinja is --

When there is oversuppply of fair trade coffee > demand of fair trade coffee, why will that lead to lowering prices of non-fair trade coffee ?

The sentence structure is set up in my view to suggest somehow

oversuppply of fair trade coffee > demand of fair trade coffee--- IS CAUSING --> lower prices of non-fair trade coffee

Why ? how ?
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^^^^^

But my fundamental question GMATNinja is --

When there is oversuppply of fair trade coffee > demand of fair trade coffee, why will that lead to lowering prices of non-fair trade coffee ?

The sentence structure is set up in my view to suggest somehow

oversuppply of fair trade coffee > demand of fair trade coffee--- IS CAUSING --> lower prices of non-fair trade coffee

Why ? how ?
Again, the author hasn't provided us with a "perfect" argument that connects all of these dots. All you have to know is that the author argues that, because there is an oversupply of fair-trade coffee, the price of non-fair-trade coffee goes down.

Could we fill in those gaps ourselves? Sure! Imagine a world in which the demand for coffee in general is pretty constant. Out of this same constant demand, a growing portion of people choose to buy expensive fair-trade coffee. Farmers start producing more of this expensive fair-trade coffee, so the overall supply of coffee has increased. Now there's too much coffee. People want the expensive fair-trade stuff, which leaves a bunch of non-fair trade coffee going stale on the shelf. So, stores lower the price of non-fair-trade coffee.

Now, the author never explains the above, and it's really not your job to fill in those gaps yourself. Instead, take note of the gaps and use that analysis as you answer the question.

Alternatively, if you really don't understand the substance of a particular critical reasoning passage, just move on! Spend that time answering a different question on your verbal section.

I hope that helps!
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Hi KarishmaB, GMATNinja, egmat

Can you please take a look at my below query & help? Your help will be much appreciated. Thank you!

My confusion:

Before that, note: FTC = fair-trade coffee; NFTC = Non-fair-trade coffee

What's mentioned in the passage:

1. The prices of FTC rise due to premium it commands
2. Question mentions "because they receive a higher price for the FTC they grow". So it seems that there are two types of coffees that can be grown "FTC" & "NFTC"

Confusion:

1. The question loosely states that "By raising average prices for coffee, it encourages more coffee to be produced" & then goes onto say that "This lowers prices for non-fair-trade coffee and thus lowers profits for non-fair-trade coffee farmers."
[Here I understand he's talking about supply & demand. The prices will go down for a product when there is over supply of it.]

2. However, what I don't understand is the chain of thoughts of the author to conclude abobe?
How I see is, why will a rise in the prices of FTC lead to a rise is price of NFTC thus over production of NFTC & thus reduction in prices of NFTC?
The farmers that manufacture NFTC know the prices for THEIR product is not risen but the prices of FTC has risen.

3. In one place the question explicitly mentions "FTC they grow" & makes a distinction between FTC & NFCT & then goes on to loosely make a casual claim about coffee in general?


I understand that option B is correct & this is an "Evaluate" question, but even with using information from option B, it does not help resolve this apparanet inconsistency in the question, unless the author has made some extremely deep unstated assumptions.

Thanks!
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minionbaba
My confusion: When fair-trade coffee prices rise, it encourages fair-trade coffee farmers to overproduce fair-trade coffee. It will not encourage regular non-fair-trade coffee farmers to over produce non-fair-trade coffee.

In that case, how does overproduction of fair-trade coffee result in lower prices for non-fair-trade coffee, and thus lower profits for non-fair-trade coffee farmers?

The argument is not saying that non-fair-trade farmers overproduce.

It is saying that fair-trade coffee is still part of the broader coffee supply. If higher fair-trade prices encourage more fair-trade coffee production, then total coffee supply can increase beyond what consumers want to buy. That extra supply puts downward pressure on coffee prices generally, including prices for non-fair-trade coffee.

Also, some fair-trade coffee may not be sold as fair-trade if demand for fair-trade coffee is limited. It can then compete in the regular coffee market.

So overproduction of fair-trade coffee can indirectly hurt non-fair-trade farmers by increasing the overall supply of coffee.
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minionbaba
Hi KarishmaB, GMATNinja, egmat

Can you please take a look at my below query & help? Your help will be much appreciated. Thank you!

My confusion:

Before that, note: FTC = fair-trade coffee; NFTC = Non-fair-trade coffee

What's mentioned in the passage:

1. The prices of FTC rise due to premium it commands
2. Question mentions "because they receive a higher price for the FTC they grow". So it seems that there are two types of coffees that can be grown "FTC" & "NFTC"

Confusion:

1. The question loosely states that "By raising average prices for coffee, it encourages more coffee to be produced" & then goes onto say that "This lowers prices for non-fair-trade coffee and thus lowers profits for non-fair-trade coffee farmers."
[Here I understand he's talking about supply & demand. The prices will go down for a product when there is over supply of it.]

2. However, what I don't understand is the chain of thoughts of the author to conclude abobe?
How I see is, why will a rise in the prices of FTC lead to a rise is price of NFTC thus over production of NFTC & thus reduction in prices of NFTC?
The farmers that manufacture NFTC know the prices for THEIR product is not risen but the prices of FTC has risen.

3. In one place the question explicitly mentions "FTC they grow" & makes a distinction between FTC & NFCT & then goes on to loosely make a casual claim about coffee in general?


I understand that option B is correct & this is an "Evaluate" question, but even with using information from option B, it does not help resolve this apparanet inconsistency in the question, unless the author has made some extremely deep unstated assumptions.

Thanks!

Coffee is coffee. It is the same product. FTC means coffee which was sourced from the farmer by paying the farmer his due. That the farmer was not ripped off in the sale. Then you can print FTC on your coffee. That this coffee was obtained for processing packaging etc after paying the farmer his due. It is still the same product as NFTC coffee.
If they charge more for FTC coffee, they will earn better margins. More margins in an industry means more competitors will come in which will increase the supply of coffee labelled FTC. Then the prices of coffee without this label is likely to decrease because people will buy FTC coffee. Coffee is coffee to them - they will not buy both NFTC and FTC. It is possible that oversupply depresses the price of FTC coffee too but already FTC coffee is more expensive. So the reduction may not impact it as much but the reduction in price of NFTC will impact those farmers who are not getting fair prices more.
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Hi minionbaba,

Your reading of the two product types is sharp, and you've actually put your finger on the exact assumption the argument leans on. The fix is to see that the economist is treating coffee as one supply pool, not two sealed markets.

Here's the chain, slowed down:

- Fair-trade buyers pay a premium, so the average price a grower can get for coffee goes up.
- A higher average price is a signal to grow more coffee - and farmers respond to the price they could get, not to a label decided in advance.
- But consumers only buy so much coffee at the fair-trade premium. The extra coffee that doesn't sell as fair-trade doesn't vanish - it gets sold as ordinary (non-fair-trade) coffee.
- That surplus floods the non-fair-trade side, and more supply at unchanged demand pushes the non-fair-trade price down. Lower price means lower profit for those farmers.

So the answer to your "the NFTC farmers' price hasn't risen" point is: it hasn't risen, but their market is where the overflow lands. They're hurt not by a price rise, but by everyone else's incentive to overproduce - extra beans spilling into their pool. The distinction you're drawing (FTC vs. NFTC as separate worlds) is exactly the link the economist quietly assumes away: coffee is coffee once it's grown, and unsold "fair-trade" beans become non-fair-trade supply.

One more thing worth separating: this is an Evaluate question, so you don't need the causal chain to be airtight - you only need to judge how strong it is. That's why B wins. The conclusion is "hurts more farmers than it helps" - a head-count. To test it, you need to know how many farmers are on each side: if only a few grow fair-trade (helped) and most grow non-fair-trade (hurt), the economist is right; if most grow fair-trade, the argument collapses. B hands you exactly that proportion.

Answer: B

minionbaba
Hi KarishmaB, GMATNinja, egmat

Can you please take a look at my below query & help? Your help will be much appreciated. Thank you!

My confusion:

Before that, note: FTC = fair-trade coffee; NFTC = Non-fair-trade coffee

What's mentioned in the passage:

1. The prices of FTC rise due to premium it commands
2. Question mentions "because they receive a higher price for the FTC they grow". So it seems that there are two types of coffees that can be grown "FTC" & "NFTC"

Confusion:

1. The question loosely states that "By raising average prices for coffee, it encourages more coffee to be produced" & then goes onto say that "This lowers prices for non-fair-trade coffee and thus lowers profits for non-fair-trade coffee farmers."
[Here I understand he's talking about supply & demand. The prices will go down for a product when there is over supply of it.]

2. However, what I don't understand is the chain of thoughts of the author to conclude abobe?
How I see is, why will a rise in the prices of FTC lead to a rise is price of NFTC thus over production of NFTC & thus reduction in prices of NFTC?
The farmers that manufacture NFTC know the prices for THEIR product is not risen but the prices of FTC has risen.

3. In one place the question explicitly mentions "FTC they grow" & makes a distinction between FTC & NFCT & then goes on to loosely make a casual claim about coffee in general?


I understand that option B is correct & this is an "Evaluate" question, but even with using information from option B, it does not help resolve this apparanet inconsistency in the question, unless the author has made some extremely deep unstated assumptions.

Thanks!
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