Check GMAT Club Decision Tracker for the Latest School Decision Releases https://gmatclub.com/AppTrack

 It is currently 26 May 2017, 03:00

### 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

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

# Events & Promotions

###### Events & Promotions in June
Open Detailed Calendar

 new topic post reply Question banks Downloads My Bookmarks Reviews Important topics
Author Message
Intern
Joined: 04 Jul 2012
Posts: 3
Followers: 0

Kudos [?]: 0 [0], given: 1

### Show Tags

06 Jul 2012, 18:42
The following appeared in the opinion section of a national newsmagazine:

“To reverse the deterioration of the postal service, the government should raise the price of postage stamps. This solution will no doubt prove effective, since the price increase will generate larger revenues and will also reduce the volume of mail, thereby eliminating the strain on the existing system and contributing to improved morale.”

The writer states that raising the price of postage stamps will simultaneously raise revenue and reduce the volume of mail, which in turn will improve morale by reducing "strain" on the system.

---

The writer's argument is flawed on a number of levels. First and foremost is the relationship between revenue and volume. The revenue of a postal system, attributed to stamped delivery is equal to Price x Quantity. The writer assumes that by raising postal rates (price) revenue will increase even though quantity will decrease. Perhaps the writer should instead state that gross margins will increase, this makes more sense since the change in revenue is dependent on both the change in the price and the drop in the volume of sales due to the change in price.

This leads us to my second point: without more information it is difficult to determine if an increase in price will, in fact, lead to a decrease in volume. For many companies and institutions (especially government institutions such as the IRS), the demand for postal services is inelastic. Meaning that the number of stamps purchased by the IRS is static, based on the number of letters it has to send out, irrespective of the cost of sending those letters out.

On the other extreme, postage stamps could be extremely sensitive to price, and a small increase in the price could lead to massive declines in demand.

The writer also states that a decrease in volume will increase morale. Again this is a dubious conclusion; studies have shown that too little work on the job can be worse for morale than too much. In fact a large drop in volume could result in massive layoffs for the postal service which would almost certainly have a negative impact on morale.

The writer is also assuming that there is a strain on the postal service. I do not believe this statement to be supported by fact. Over the last decade, the internet has taken the place of much of the volume of messages travelling through the postal system; both commercial and personal correspondences. In addition, advances in automation and changes to workplace conditions have made the postal service on the more pleasant and stress free places to work.

Finally the writer is assuming that a majority of revenue comes from the sales of stamps. These days the postal service captures a much larger portion of their revenue from other services such as courier services.

Overall, the writer does not seem to have done any research nor does he seem to have any background in basic economic theory. His statement is not provable and is most likely incorrect.
Kaplan GMAT Instructor
Joined: 25 Aug 2009
Posts: 644
Location: Cambridge, MA
Followers: 84

Kudos [?]: 286 [0], given: 2

### Show Tags

07 Jul 2012, 16:57
calleo wrote:
The following appeared in the opinion section of a national newsmagazine:

“To reverse the deterioration of the postal service, the government should raise the price of postage stamps. This solution will no doubt prove effective, since the price increase will generate larger revenues and will also reduce the volume of mail, thereby eliminating the strain on the existing system and contributing to improved morale.”

The writer states that raising the price of postage stamps will simultaneously raise revenue and reduce the volume of mail, which in turn will improve morale by reducing "strain" on the system.

---

The writer's argument is flawed on a number of levels. First and foremost is the relationship between revenue and volume. The revenue of a postal system, attributed to stamped delivery is equal to Price x Quantity. The writer assumes that by raising postal rates (price) revenue will increase even though quantity will decrease. Perhaps the writer should instead state that gross margins will increase, this makes more sense since the change in revenue is dependent on both the change in the price and the drop in the volume of sales due to the change in price.

This leads us to my second point: without more information it is difficult to determine if an increase in price will, in fact, lead to a decrease in volume. For many companies and institutions (especially government institutions such as the IRS), the demand for postal services is inelastic. Meaning that the number of stamps purchased by the IRS is static, based on the number of letters it has to send out, irrespective of the cost of sending those letters out.

On the other extreme, postage stamps could be extremely sensitive to price, and a small increase in the price could lead to massive declines in demand.

The writer also states that a decrease in volume will increase morale. Again this is a dubious conclusion; studies have shown that too little work on the job can be worse for morale than too much. In fact a large drop in volume could result in massive layoffs for the postal service which would almost certainly have a negative impact on morale.

The writer is also assuming that there is a strain on the postal service. I do not believe this statement to be supported by fact. Over the last decade, the internet has taken the place of much of the volume of messages travelling through the postal system; both commercial and personal correspondences. In addition, advances in automation and changes to workplace conditions have made the postal service on the more pleasant and stress free places to work.

Finally the writer is assuming that a majority of revenue comes from the sales of stamps. These days the postal service captures a much larger portion of their revenue from other services such as courier services.

Overall, the writer does not seem to have done any research nor does he seem to have any background in basic economic theory. His statement is not provable and is most likely incorrect.
Hi Calleo,

Overall, very good! Your points are solid, and your paragraphing is good. However, I can only give this assignment a 4.

Two major action points will get you closer to a 6. First, remember that part of the assignment is to discuss how the author could strengthen his assignment. You covered many flaws with the argument--but what could persuade you that the argument was valid? What evidence is needed to correct those flaws?

Second, you do very well pointing out reasoning flaws, but the paragraph about the strain on the postal service was misplaced. Simply saying "the author is factually wrong" or "the problem the author is citing doesn't exist" is the easy way out; it's not what the test-taker wants to see! At the most basic level, you should accept the author's underlying premises (there is strain on the postal system) and focus on the logical, reasoning flaws in the argument.

I hope this helps, and keep the essays coming!
_________________

Eli Meyer
Kaplan Teacher
http://www.kaptest.com/GMAT

Prepare with Kaplan and save $150 on a course! Kaplan Reviews Intern Joined: 04 Jul 2012 Posts: 3 Followers: 0 Kudos [?]: 0 [0], given: 1 Re: Please rate! [#permalink] ### Show Tags 08 Jul 2012, 23:50 Would you add the action points in one paragraph? Or would you address each flaw individually? Could you write in the 1/2 paragraphs that would make this a 6? Kaplan GMAT Instructor Joined: 25 Aug 2009 Posts: 644 Location: Cambridge, MA Followers: 84 Kudos [?]: 286 [0], given: 2 Re: Please rate! [#permalink] ### Show Tags 09 Jul 2012, 08:47 calleo wrote: Would you add the action points in one paragraph? Or would you address each flaw individually? Could you write in the 1/2 paragraphs that would make this a 6? Usually, two to three sentences at the end is all you need. For example, "The author could strengthen his argument with evidence A. Additionally, evidence B and C would fix several of the flaws in his reasoning. Unfortunately, he includes none of those thing; without such data his argument is unpersuasive." _________________ Eli Meyer Kaplan Teacher http://www.kaptest.com/GMAT Prepare with Kaplan and save$150 on a course!

Kaplan Reviews

Re: Please rate!   [#permalink] 09 Jul 2012, 08:47
Similar topics Replies Last post
Similar
Topics:
Rate please. 0 25 Jan 2017, 12:24
Please rate. 4 22 Feb 2012, 14:36
Please rate 0 31 Jul 2010, 00:52
Please rate my issue 0 22 Jun 2010, 05:30
Issue Analysis - Please rate 0 12 Feb 2010, 13:02
Display posts from previous: Sort by