It is currently 21 Nov 2017, 05:16

### 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

Author Message
Intern
Joined: 26 Aug 2013
Posts: 3

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

### Show Tags

14 Sep 2013, 11:07
"Davis Technologies, a computer-chip maker, could solve its problem of declining sales by dropping its prices. This would make Davis better able to compete in the highly competitive computer chip market. The sales of chips would increase and this would substantially boost Davis' market share."

How would you rate the accuracy of the above statement? Support your position with reasons and examples.

Computer chip manufacturing is a highly competitive marketplace, in which success depends on a variety of factors, both environment and institutional. In the preceding statement, the authors concludes that in the case of Davis Technologies, market share may be increased through higher levels of sales of cheaper computer chips. This argument is invariably flawed due to the lack of information included that may substantiate the premise and assumptions of the argument that lead to the conclusion.

The primary issue with the author's argument is based on the premise that a drop in price would increase sales. Without additional information about the competitive environment, such as the price points of other competitors, the quality levels, and the market demand for cheaper chips, the conclusion is flawed. Moreover, the argument fails to take into account the reason behind the falling sales. For example, if the Davis chip is already seen as inferior by the market, lowering the prices will signal a confirmation of the low quality perception and will not lead to increased sales. Without knowing the cause of the decline in sales, the argument that a price drop will increase sales is flawed.

Secondarily, the author's conclusion that Davis' market share would substantially increase based on an increase in the sale of chips is weakened by the ambiguous language and the leap of the conclusion. Without being more specific about the level of price decrease versus the increase of sales, the argument does not necessarily lead to the conclusion. Specifically, if the amount of price decrease that Davis must incur in order to increase the sales of chips results in the same profit as before the price drop, the market share would remain the same. Without more specific language, the boost of market share cannot be concluded based on the information presented.

However, the argument has some points that may lead to the conclusion if strengthened considerably. Additional information about the competitive environment that connects the Davis sales numbers and pricing to a conclusion about the market share would strengthen the argument. For example, if Davis' was seen by customers as a high quality, but overpriced chip maker, a lower priced chip would indeed increase market share. In addition, information about market demand would greatly strengthen the argument. If there was demand for a lower quality cheaper chip with fewer competitors than the level Davis is currently competing, it may be concluded that a decrease in price would lead to an increase in market share.

In sum, the author's argument presents serious flaws in its assumptions and the premise that leads to the conclusion. However, with additional information about the competitive market and the customer demand can greatly strengthen the argument.

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

Intern
Joined: 18 Jun 2013
Posts: 5

Kudos [?]: 16 [1], given: 5

### Show Tags

15 Sep 2013, 05:55
1
KUDOS
allierubin wrote:
"Davis Technologies, a computer-chip maker, could solve its problem of declining sales by dropping its prices. This would make Davis better able to compete in the highly competitive computer chip market. The sales of chips would increase and this would substantially boost Davis' market share."

How would you rate the accuracy of the above statement? Support your position with reasons and examples.

Computer chip manufacturing is a highly competitive marketplace, in which success depends on a variety of factors, both environment and institutional. In the preceding statement, the authors concludes that in the case of Davis Technologies, market share may be increased through higher levels of sales of cheaper computer chips. This argument is invariably flawed due to the lack of information included that may substantiate the premise and assumptions of the argument that lead to the conclusion.

The primary issue with the author's argument is based on the premise that a drop in price would increase sales. Without additional information about the competitive environment, such as the price points of other competitors, the quality levels, and the market demand for cheaper chips, the conclusion is flawed. Moreover, the argument fails to take into account the reason behind the falling sales. For example, if the Davis chip is already seen as inferior by the market, lowering the prices will signal a confirmation of the low quality perception and will not lead to increased sales. Without knowing the cause of the decline in sales, the argument that a price drop will increase sales is flawed.

Secondarily, the author's conclusion that Davis' market share would substantially increase based on an increase in the sale of chips is weakened by the ambiguous language and the leap of the conclusion. Without being more specific about the level of price decrease versus the increase of sales, the argument does not necessarily lead to the conclusion. Specifically, if the amount of price decrease that Davis must incur in order to increase the sales of chips results in the same profit as before the price drop, the market share would remain the same. Without more specific language, the boost of market share cannot be concluded based on the information presented.

However, the argument has some points that may lead to the conclusion if strengthened considerably. Additional information about the competitive environment that connects the Davis sales numbers and pricing to a conclusion about the market share would strengthen the argument. For example, if Davis' was seen by customers as a high quality, but overpriced chip maker, a lower priced chip would indeed increase market share. In addition, information about market demand would greatly strengthen the argument. If there was demand for a lower quality cheaper chip with fewer competitors than the level Davis is currently competing, it may be concluded that a decrease in price would lead to an increase in market share.

In sum, the author's argument presents serious flaws in its assumptions and the premise that leads to the conclusion. However, with additional information about the competitive market and the customer demand can greatly strengthen the argument.

5.5.
Very well written. I hope this was timed.

Kudos [?]: 16 [1], given: 5

Intern
Joined: 26 Aug 2013
Posts: 3

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

### Show Tags

18 Sep 2013, 19:06
Yes, it was timed. Thank you for the rating, much appreciated!

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

Intern
Joined: 12 Apr 2014
Posts: 31

Kudos [?]: 7 [0], given: 1

Concentration: General Management, Human Resources
GMAT 1: 660 Q50 V30
GMAT 2: 740 Q50 V40

### Show Tags

13 May 2016, 23:23
allierubin wrote:
Yes, it was timed. Thank you for the rating, much appreciated!

Good writing.

You have captured the flaws well.
5.5.

hope you are writing the conclusion first - just in case you run out of time.

Kudos [?]: 7 [0], given: 1

Intern
Joined: 16 May 2016
Posts: 14

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

### Show Tags

25 May 2016, 05:25
cool writing! + I reread twice. Everything is perfect!

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

Display posts from previous: Sort by