NEW HERE? LEARN MORE
closeclose
Last visit was: 03 May 2024, 06:02 It is currently 03 May 2024, 06:02
Decision Tracker
My Rewards
New posts
New comers' posts

Close
GMAT Club Daily Prep
Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.

Customized
for You

we will pick new questions that match your level based on your Timer History

Track
Your Progress

every week, we’ll send you an estimated GMAT score based on your performance

Practice
Pays

we will pick new questions that match your level based on your Timer History
Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.
Go to My Error Log Learn more
Close
Request Expert Reply
Confirm Cancel

Most economists believe that reducing the price of any product general

SORT BY:
Date
Kudos
Tags:
Find Similar Topics 
Show Tags
Hide Tags
User avatar
L
akela
VP
VP
Joined: 30 Jan 2016
Posts: 1232
Own Kudos [?]: 4581 [11]
Given Kudos: 128
Send PM
Reviews Badge
Most economists believe that reducing the price of any product general [#permalink] New post   14 Aug 2019, 11:27
11
Bookmarks
00:00
A
B
C
D
E

Difficulty:

75% (hard)

Question Stats:

55% (02:15) correct 45% (02:04) wrong based on 392 sessions
Hide Show timer Statistics
Most economists believe that reducing the price of any product generally stimulates demand for it. However, most wine merchants have found that reducing the price of domestic wines to make them more competitive with imported wines with which they were previously comparably priced is frequently followed by an increase in sales of those imported wines.

Which one of the following, if true, most helps to reconcile the belief of most economists with the consequences observed by most wine merchants?

(A) Economists’ studies of the prices of grocery items and their rates of sales rarely cover alcoholic beverages.
(B) Few merchants of any kind have detailed knowledge of economic theories about the relationship between item prices and sales rates.
(C) Consumers are generally willing to forgo purchasing other items they desire in order to purchase a superior wine.
(D) Imported wines in all price ranges are comparable in quality to domestic wines that cost less.
(E) An increase in the demand for a consumer product is compatible with an increase in demand for a competing product.
ShowHide Answer
Official Answer
E
User avatar
G
sharathnair14
Manager
Manager
Joined: 05 May 2019
Posts: 166
Own Kudos [?]: 293 [2]
Given Kudos: 222
Schools: LBS '25 ISB '25 Manchester'26 Stern '26 Tuck '26 INSEAD Aug'24 intake Yale '26 Kellogg '26 Wharton '26
GPA: 3
Send PM
Re: Most economists believe that reducing the price of any product general [#permalink] New post   14 Aug 2019, 11:50
2
Kudos
Alright!
Took me a moment, but the answer E explains why there is an increase in the Imported Wine, in this case, the competing product. The argument doesn't necessarily say that that the demand of the local wine has fallen. We only know that the demand for imported wine has gone up.
I chose B initially but realized it has 2 problems.
1. B talks about a consumer's behaviour, which is out of scope.
2. You'd be tempted to think that Imported Wine = Superior. Which is not the case, or simply because we don't know.
User avatar
G
KeyurJoshi
Manager
Manager
Joined: 28 Aug 2019
Posts: 155
Own Kudos [?]: 121 [0]
Given Kudos: 405
Location: India
Schools: Smurfit (D) Judge '24 (D) HEC Montreal (A) Alberta University MBS (D) Molson (A) Smith
GMAT 1: 710 Q49 V38
GPA: 3.6
WE:Business Development (Computer Software)
Send PM
Reviews Badge
Re: Most economists believe that reducing the price of any product general [#permalink] New post   22 Nov 2020, 02:00
Premise: Price drop increases demand for any product
Paradox: Price drop in domestic wines lead to increase in demand(sales)for imported wines.

Which one of the following, if true, most helps to reconcile the belief of most economists with the consequences observed by most wine merchants?

(A) Economists’ studies of the prices of grocery items and their rates of sales rarely cover alcoholic beverages. - Irrelevant.

(B) Few merchants of any kind have detailed knowledge of economic theories about the relationship between item prices and sales rates. - Irrelvant. Does not really help resolve the paradox.

(C) Consumers are generally willing to forgo purchasing other items they desire in order to purchase a superior wine. - This is a generalization about superior wine. Even if this is true, it doesnt help to understand why the demand for imported wines went up?

(D) Imported wines in all price ranges are comparable in quality to domestic wines that cost less. - Even if this is true, it certainly does not affect the paradox.

(E) An increase in the demand for a consumer product is compatible with an increase in demand for a competing product. - Basically what E says is that...

prices of domestic wines dropped ----> increase in demand for domestic wines
(increase in demand for domestic wine is compatible with increase in demand for imported wine.)
so, people buying domestic wine (bc of the price drop) turned to buy imported wine too. ----> increasing the demand and sale for imported wine.
avatar
S
acegmat20
Intern
Intern
Joined: 03 Aug 2019
Posts: 23
Own Kudos [?]: 45 [0]
Given Kudos: 123
Location: India
Schools: ISB'22 NUS '22 IIMA PGPX'22
Send PM
Re: Most economists believe that reducing the price of any product general [#permalink] New post   23 Nov 2020, 20:38
I solved this by POE, all the other options are out of scope which leaves only E as the answer.

(A) Economists’ studies of the prices of grocery items and their rates of sales rarely cover alcoholic beverages. -- Out of Scope
(B) Few merchants of any kind have detailed knowledge of economic theories about the relationship between item prices and sales rates. --Out of Scope, even if they did have any knowledge does not mean they the demand relationship for domestic-imported wine would have changed
(C) Consumers are generally willing to forgo purchasing other items they desire in order to purchase a superior wine. -- Out of scope, no question of consumers not purchasing other items
(D) Imported wines in all price ranges are comparable in quality to domestic wines that cost less. -- Out of scope, talks about quality which is not in the argument
(E) An increase in the demand for a consumer product is compatible with an increase in demand for a competing product. --Correct answer and helps resolve the paradox. It says that the increase in the demand for domestic wine is also accompanied by an increase in the demand of the imported wine.
User avatar
VerbalBot
Non-Human User
Joined: 01 Oct 2013
Posts: 17254
Own Kudos [?]: 848 [0]
Given Kudos: 0
Send PM
Re: Most economists believe that reducing the price of any product general [#permalink] New post   05 Jun 2023, 20:29
Hello from the GMAT Club VerbalBot!

Thanks to another GMAT Club member, I have just discovered this valuable topic, yet it had no discussion for over a year. I am now bumping it up - doing my job. I think you may find it valuable (esp those replies with Kudos).

Want to see all other topics I dig out? Follow me (click follow button on profile). You will receive a summary of all topics I bump in your profile area as well as via email.
GMAT Club Bot
gmatclubot
Re: Most economists believe that reducing the price of any product general [#permalink]
05 Jun 2023, 20:29
Moderators:
GMATNinja
GMAT Club Verbal Expert
6925 posts
GMATNinjaTwo
GMAT Club Verbal Expert
238 posts
mysterymanrog
CR Forum Moderator
832 posts

Powered by phpBB © phpBB Group | Emoji artwork provided by EmojiOne
Main navigation
GMAT Resources
Partners
MBA Resources
www.gmac.com|www.mba.com | | GMAT Club Rules | Terms and Conditions