In the past, every ten-percentage-point increase in cigarette prices

Question

In the past, every ten-percentage-point increase in cigarette prices in the country of Coponia has decreased per capita sales of cigarettes by four percent. Coponia is about to raise taxes on cigarettes by 9 cents per pack. The average price of cigarettes in Coponia is and has been for more than a year 90 cents per pack. So the tax hike stands an excellent chance of reducing per capita sales of cigarettes by four percent.

Which of the following is an assumption on which the argument depends?

A. Tobacco companies are unlikely to reduce their profit per pack of cigarettes to avoid an increase in the cost per pack to consumers in Coponia.
B. Previous increases in cigarette prices in Coponia have generally been due to increases in taxes on cigarettes.
C. Any decrease in per capita sales of cigarettes in Coponia will result mainly from an increase in the number of people who quit smoking entirely.
D. At present, the price of a pack of cigarettes in Coponia includes taxes that amount to less than ten percent of the total selling price.
E. The number of people in Coponia who smoke cigarettes has remained relatively constant for the past several years.

Vavali · Accepted Answer

I go for A. My reasoning below;

Evidence:  In the past, every ten-percentage-point increase in cigarette prices in the country of Coponia has decreased per capita sales of cigarettes by four percent

EVidence  Coponia is about to raise taxes on cigarettes by 9 cents (10%) per pack. The average price of cigarettes in Coponia is and has been for more than a year 90 cents per pack.

The conclusion:  So the tax hike stands an excellent chance of reducing per capita sales of cigarettes by four percent

Underlying assumption is that Tobacco companies are unlikely to reduce their profit (which equates to increased price) per pack of cigarettes to avoid an increase in the cost per pack to consumers in Coponia. If they were willing to reduce their prices which translates to reduced profits then reduced per capita sales is more likely to be increased and not the opposite as a result the conclusion will be weakened.

GMATNinja · Answer

Let's first talk about how to approach assumption questions: this particular question asks us to find "an assumption on which the argument depends." This means that the information in the correct answer choice MUST be true in order for the argument to hold (in other words, a necessary condition).

This is very different than saying that the correct answer choice is the ONLY "possible explanation for the conclusion." For any given argument, there are virtually unlimited assumptions that are necessary in order for the conclusion to hold. In this case, for instance, the author assumes that a massive meteorite will not crash into the earth and end human life as we know it (in which case per capita sales of cigarettes would go down by much more than four percent for reasons outside of the tax increase). So, we are not looking for the only possible explanation for the argument -- we are just looking for one necessary condition for the author to reach his/her conclusion.

As you go through the answer choices, ask yourself for each one: MUST this information be true in order for the argument to hold?

Take a look at (C):
 
Does this  have  to be true in order for the argument to hold? No, it does not -- the conclusion only depends on per capita sales of cigarettes going down by 4%. That reduction could come from some people quitting entirely, or many people cutting back just a bit. Because the argument doesn't require the information in (C) to be true, this is not an assumption on which the argument depends. Eliminate (C).

Now look at (A):
 
The argument depends on the overall price of cigarettes increasing by ten percent in order to see a drop in sales of four percent. We know that the tax hike was just achieving that ten percent increase -- so in order for the expected four percent decrease in sales, the entire price of the tax hike must be added onto the existing price of cigarettes.

Answer choice (A) eliminates a possible way that this ten percent increase would not happen (by tobacco companies reducing their profits to prevent consumers from seeing the price go up so much). This information MUST be true in order for the argument to hold, so (A) is our answer.

I hope that helps!

aviator83 · Answer

A. Tobacco companies are unlikely to reduce their profit per pack of cigarettes to 
avoid an increase in the cost per pack to consumers in Coponia.
- correct (note also 9% increase is on existing taxes)
B. Previous increases in cigarette prices in Coponia have generally been due to 
increases in taxes on cigarettes.
- previous increase is due to taxes or not is irrelevant to the argument.
C. Any decrease in per capita sales of cigarettes in Coponia will result mainly from 
an increase in the number of people who quit smoking entirely.
- no that's not assumed. it's too strong a statement.
D. At present, the price of a pack of cigarettes in Coponia includes taxes that amount 
to less than ten percent of the total selling price.
- even if they do, we don't know what impact a  9% percent increase  in taxes would manifest into - i mean whether the impact would lead to a 10 %  percentage point increase  on selling price per pack or less. can't say.
E. The number of people in Coponia who smoke cigarettes has remained relatively 
constant for the past several years.
- irrelevant. whether people have increased or remained relatively constant - the impact on sales is in percentage terms - 4% decrease. so number really isn't the game here.

vd · Answer

IMO A is the answer 
here is my reasoning for the same

Premise 1
In the past, every ten-percentage-point increase in cigarette prices in the country of Coponia has decreased per capita sales of cigarettes by four percent. 
Premise 2 
Coponia is about to raise taxes on cigarettes by 9 cents per pack.

Conclusion 
 So  (the word indicates conclusion) the tax hike stands an excellent chance of reducing per capita sales of cigarettes by four percent.

we are supposed to find the assumption behind this question

now we are told that each time the Company increases the prices, the per capita sales goes down...and now that again Company is proposing a 9 cent increase here then also the per capita sales will further go down 
now let us think for a minute what could stop this from happening 
if the COmpany reduces its profit margin that it had always claimed as in the past then the prices increase would be off set by that decrease in the profit margin and the per capita sales will not go down 
so this should be the assumption here

and A succinctly

HTH

what is the OA for this

Juz2play · Answer

One important tool to use in assumption questions is the negation technique. If you negate the correct answer choice, it should weaken the argument. It's useful tool when you stuck between two answer choices. So let's try negating choice (D). "At the present, the price of a pack of cigarettes in Coponia DOES NOT include taxes that amount to less than ten percent of the total selling price" If this is the case, the current taxes and the additional 9 cents would increase the total price. Thus, this further strengthens the argument instead of WEAKENING it. Hope this helps ^^

JarvisR · Answer

every ten-percentage-point increase in cigarette prices in the country of Coponia has decreased per capita sales of cigarettes by four percent. Coponia is about to raise taxes on cigarettes
 
Conclusion:
 Tax hike stands an excellent chance of reducing per capita sales of cigarettes by four percent. 
A. Tobacco companies are unlikely to reduce their profit per pack of cigarettes to avoid an increase in the cost per pack to consumers in Coponia.
E. The number of people in Coponia who smoke cigarettes has remained relatively constant for the past several years.

A vs E:
With option E there can be multiple combinations, which would give different results. e.g. 
# of smokers may go high or low Or it may be that each smoker by more packets etc. Whereas A is very straight in answering the assumption after negation. 
Also option E doesnt mention about the tax hike. Infact it introduces another factor that can impact the per capita consumption and we are not not concerned about that.

unuk50 · Answer

Using the MGMAT answer from a forum here, for everyone's benefit.

Question Type: Assumption. 
Conclusion: The tax hike stands an excellent chance of reducing per capita sales of cigarettes by four percent.
Tactic: Negation

arirux92 · Answer

Premise  : 10% increase in selling price reduces smoking by 4%. The 10% hike in taxes will reduce smoking by 4%.

Assumption : There is a wide gap between selling price and increasing taxes. The argument has facts based on selling price but it depends on tax hike.

So the perfect assumption would be " Increased tax hike = increased selling price"

A says that the companies won't cut back on profit for negating the tax hike. So ja, it does mean that sp will increase by 10% ( hold on)

For other confusing option :

he number of people in Coponia who smoke cigarettes has remained relatively constant for the past several years.

This is not an assumption, this is breaking the argument. Assumption holds the argument together.

According to E: past several years smokers constant. So changing the selling price won't affect it anyway.

Please let me know if you have doubts in other options.

duybachhpvn · Answer

GMATNinja ,  GMATNinjaTwo ,  nightblade354

Hi,

Could you help me understand if I understand the argument correctly? As I understand, for an argument in GMAT, there should be no other possible explanation for the conclusion other than the underlying assumption (read this from PowerScore book). So for this question, can I understand that the author considered the increase in selling price is the only cause of the reduction in sale/capita?

Let's say if option C is changed to: "Any decrease in per capita sales of cigarettes in Coponia will NOT result mainly from an increase in the number of people who quit smoking entirely." The negation of this will present a different explanation for the reduction in the per capita sales of cigarettes, and thus will break the conclusion that the increase in selling price will result in lower per capital sales of cigarettes.

I'm not sure if the condition of increases in selling price is a NECESSARY or a SUFFICIENT condition for the conclusion here? If it is just sufficient, then my original understanding about the author's argument is incorrect.

Thank you.

HSogani · Answer

________________________________________
Why not B?

MartyTargetTestPrep · Answer

Here's (B).

B. Previous increases in cigarette prices in Coponia have generally been due to increases in taxes on cigarettes.

The premise is simply that, when prices have increased by 10 percent, sales have decreased by 4 percent.

How that price increase has occurred doesn't really matter. We are concerned with the effect on sales of a price increase, and that effect should be the same regardless of how the price increase occurred.

ag1991 · Answer

I understand why A is the correct choice but unable to wrap my head around why E is incorrect. The conclusion states that the 4% hike in taxes will result in a consequent decrease in per capita sales of cigarettes. The way I am visualizing this number is as total sales of cigarettes/ total population of Coponia. If the sales remain the same but the total population increases then the per capita sales will decrease right? And we need the the total pop to be constant for the tax hike to result in a decrease in per capita sales.

GMATNinja MartyTargetTestPrep could you guys help resolve? Thanks in advance.

GMATNinja   MartyTargetTestPrep  could you guys help resolve? Thanks in advance.

MartyTargetTestPrep · Answer

1. Where does the passage say anything about an increase, or decrease, in the population of Coponia?

2. Regardless of whether the population increases or decreases, choice (E) does not say that, in the future, the number of people smoking will remain constant, only that in the past the number has been relatively constant.

3. Even if the population were to increase without an increase in the number of people who smoke, the tax hike itself could have the effect of decreasing per capita sales of cigarettes, regardless of what else has occurred. Notice that the passage does not predict anything other than that the tax hike will reduce per capita sales. In other words, if per capita sales decrease before the tax hike occurs, then what the passage says implies that per capita sales will decrease even more because of the tax hike.

Pietrus95 · Answer

Please some one explain why B isn't correct.

Would it have been correct without the word "previous"???

My reasoning is that the conclusion would possible not be true if there were other factors influencing the sales of the cigs.

MBAB123 · Answer

Pietrus95 , B has no baring on the argument. Whatever happens generally or has happened generally in the past is not our concern. The govt is about to increase the tax, which is one component of the total price. We need something to cement the total price except taxes. A does that perfectly. Also, I've noticed that it might not be the best approach to think about an option after removing certain words. Each word in a GMAT question plays a huge role and by removing words and then thinking about the option may not be helpful as it will certainly hamper the quality of the option. Of course, I am no expert so take this response with a pinch of salt!

abhola · Answer

HI  Bunuel   GMATNinja

A question wrt to the terminology used in the question and it got me pretty confused.

It mentions "10 percentage point increase" - which means the difference b/w the two percentages should be 10%.
It should not be confused with a 10% increase, IMO.
But then again, the passage mentioned no other related percentage from which we can take the difference.

Could you please clarify what to consider in these cases?

Thanks!

GMATNinja · Answer

Interesting question!

I think you're on the right track when you mention that we don't have another percentage to compare to, so it's a bit unclear what "ten-percentage-point increase" means in this context. I suppose that because the initial price in the passage is 90 cents and the increase is 9 cents, then we can say that this ten percent increase is equivalent to a ten percentage point increase (from 100% to 110%).

Overall, I think the intent of this passage is just to show what happens to per capita sales when the price of cigarettes is increased by 10 percent, and none of the logic of the passage relies on the distinction between percent increase and percentage-point increase.

Great question, and I hope that helps a bit!

Namangupta1997 · Answer

Hi  ThatDudeKnows

If we negate A and assume that the sellers are actually wiling to reduce their profits. The amount of tax paid is 9 cents and that is constant. So 9 cents tax on a 90 cents item amounts to a 10% increase. Now if the tobacco company reduces the selling price, so as to reduce their profits, from 90 to suppose 85. The tax amount is still 9 cents. So in this case the new price would be 94 cents. From 85 to 94, that is an increase of approx. 10.5%. The increase in price has been in fact more than 10%. Now since the tax value of 9 cents is fixed, the more we reduce the selling price, the greater would be the % increase. Our objective would still be attained. Or do we have to assume that % increase has to be EXACTLY 10%?

ThatDudeKnows · Answer

If the consumer goes from paying 90 cents over the past year to paying 94 cents, that increase is less than our 10% threshold. In your example, the consumer never pays 85 cents, so that number shouldn't factor into their decision. Make sense?

In the past, every ten-percentage-point increase in cigarette prices

Prep Toolkit

Top 5 GMAT Debrief Videos

615 to 715 in 15 Days (Ria's Strategies)

More than Quant/Verbal Abilities: Speed vs. Accuracy

745 with Only Self-Prep and GMAT Club

From 555 to 765: 210-point Improvement

Perfect 805 Score Debrief by Julia

My Rewards

GMAT Critical Reasoning (CR) Questions

In the past, every ten-percentage-point increase in cigarette prices

Prep Toolkit

615 to 715 in 15 Days (Ria's Strategies)

More than Quant/Verbal Abilities: Speed vs. Accuracy

745 with Only Self-Prep and GMAT Club

From 555 to 765: 210-point Improvement

Perfect 805 Score Debrief by Julia

My Rewards