The exchange rate between the currency of Country X and that of Countr

OFFICIAL EXPLANATION

The argument focuses on the relative cost of goods and services in Countries X and Y due to an exchange rate that has historically favored the currency of Country Y. The argument presents an apparent discrepancy: the citizens of Country Y often take their vacations in Country X, yet rarely purchase clothing or electronics in Country X, despite the fact that those items are more expensive in their home country, even when sales taxes are taken into account. The correct answer will be one that indicates some reason why it might not actually be cheaper for citizens of Country Y to purchase clothing and electronics in Country X.

(A) The fashion preferences of the citizens of Country Y do not directly explain their buying habits. To be relevant, this statement would have to go further to link fashion preferences to purchasing decisions: for example, it would have to continue “…and are therefore willing to pay more for the goods available in their own country.”

(B) The fact that stores in Country Y receive the latest fashions and technology earlier than stores in Country X does not address the buying habits of the citizens. Even if we could assume that the citizens of Country Y demand the latest goods as soon as they are available, it still would not directly explain their buying habits. To be relevant, this statement would have to go further to link consumer preferences to purchasing decisions: for example, it would have to continue “…and the citizens of Country Y are willing to pay more in their own country just to acquire the latest goods as soon as they are available.”

(C) The attitude of the citizens of Country X is irrelevant to an argument about the purchasing habits of the citizens of Country Y.

(D) CORRECT. This choice states that the government of Country Y imposes tariffs on imported goods. This suggests that perhaps items that are purchased in Country X and brought into Country Y become prohibitively expensive because of the tariffs and could explain the spending habits of the citizens of Country Y.

(E) The currency of Country Z is irrelevant to why citizens of Country Y rarely purchase clothing or electronics in Country X.

Answer should be B.

A - It is clearly mentioned that " those items are more expensive in their home country...". Apart from that this option is talking about "preference" not actual buying habit. So, incorrect.
B - Explains a reason, apart from cost, that is considered while making decision to buy. Correct.
C - Does not affect the buyers of country Y. Incorrect.
D - Buying is not "Importing". Incorrect.
E - The argument is concerned about the currency comparison between country X and Y. So, this OFS. Incorrect.

The exchange rate between the currency of Country X and that of Country Y has historically favored the currency of Country Y. Because of this, citizens of Country Y often take their vacations in Country X, where the exchange rate makes hotels and restaurants more affordable. Yet, citizens of Country Y rarely purchase clothing or electronics in Country X, despite the fact that those items are more expensive in their home country, even when sales taxes are taken into account. Which of the following, if true, would best explain the buying habits of the citizens of Country Y?

A. Citizens of Country Y prefer the fashions available in their own country.
What about electronics?

B. Stores in Country X receive the latest fashions and technology several months after they are available in Country Y.
If the fashions and technology is inexpensive enough in Country X, residents of Country Y may still wait to go buy their clothes and electronics in Country X.

C. The citizens of Country X resent the buying power of the currency of Country Y.
Does not impact Country Y's spending habit.

D. The government of Country Y imposes tariffs on imported goods.
If the tariffs are high enough they may deter Country Y from buying the fashions and electronics in Country X.

E. The currencies of Country X and Country Y are both weak compared to the currency of Country Z.
Has nothing to do with Country Y's spending in Country X.

The only reason for Citizens of Country Y not buying clothers and electronic is becuse these good have to be taken back with them and country Y imposes import tax on the items. (Probably with the addition of income tax, the total price of item would go up)

Good question Souvik.

Request clarification :
Does shopping of clothes & electronics good abroad & carrying it to the native country equivalent of IMPORT ?
If yes, only then option 'D' stands a strong chance.

Yes, I would like more clarification as well. When I travel abroad and claim goods on my customs form, I do not pay a tariff or any tax in my native country(because I am obliviously not bringing a lot in). To me, the passage was focused on individual travelers and not large imports into the country that would warrant tariffs.

If NickHalden question is confirmed, then I would agree that D is the correct answer.

Paradox: Even though some stuff is cheaper in X, people of Y don't buy them!

A. Citizens of Country Y prefer the fashions available in their own country.
So how does that explain why citizens of country Y do NOT buy cheaper stuff from X?
No where it is mentioned that X has outdated fashion!

B. Stores in Country X receive the latest fashions and technology several months after they are available in Country Y.
Ok, so the stuff arrives a bit late in country X, but no where it is mentioned that citizens of country Y will buy only if it is new or something they have not seen in their country before.

C. The citizens of Country X resent the buying power of the currency of Country Y.
Country X is resenting the buying power, but this gap in currency value should infact encourage the citizens of country Y to buy more stuff from country X!

D. The government of Country Y imposes tariffs on imported goods.
When the citizens come back from holidays, with all their souvenirs such as a hat or a new ipod, they are taxed by their own government!
Please note that we have to assume that they are taxed in a way that it surcharge surpasses that of price of same stuff in country Y including the sales tax.

E. The currencies of Country X and Country Y are both weak compared to the currency of Country Z.
Relation to Country Z (outside and irrelevant information) adds nothing to solve this paradox

I follow what you're saying, but I think it is just a poor question all around. I am not sure about most other countries, but in the countries I have lived, bringing in a small amount of goods from a vacation is not technically considered "imports" that warrants taxing or especially a tariff (this would be extreme).

The passage never verifies the idea of purchasing goods in large or small amounts or if taxes are imposed on travelers bringing back small goods . How should one know or assume the legislation of Country X?

B isn't ideal, but i have to make less assumptions in that option to make the explanation plausible.

Just my opinion.

So what I think of 'import' is that it can be any item brought into one's country, especially across from a national border. Items can be big or small. From what I know about imports is that the tariffs/taxes are decided broadly based on the countries trade relation among other complex factors. So we cannot say that because an item is small it should have no tariff, may be it is not charged because of the trade relations between those countries.

Next, the next big idea is hidden in the argument itself. If we go back to the argument, it says that exchange rate between X and Y favors guys of Y, and therefore guys in Y go to X for holidays. What can we infer from this? A subtle understanding of behavioral aspect of Y's. i.e. they prefer to go to X because it is cheaper for Y's to spend there holidays there.

Now comes the paradox: that even though the currency is cheaper in Y, those holiday goers still do not buy stuff! Well what could be the problem? Probably it is not cheaper for Y's to buy those stuff. That's it.

If we can hunt for an answer choice that proves that something - anything - that makes it not so cheap for Y's to buy stuff, that is our answer.

Well that is how I arrived at D. B, I believe, does not do a good job in even remotely thinking in the lines of "is it cheaper for Y's?". It talks about fashion, which I could not infer if it was really a behavioral aspect of Y.

It does not matter if the goods are small or large. A small sized iphone bought from Taiwan will have import duty levied on it as will a 10k Baju Kurungs from Malaysia.

Please note that resolving the paradox involves bringing in new information. It is from the Strengthen, Weaken family where new information in choices is not just expected but also a feature to have in correct answer.

We are talking about the legislation of Country Y, who is imposing tariffs/taxes. I think you mistyped Y as X.

The exchange rate between the currency of Country X and that of Country Y has historically favored the currency of Country Y. Because of this, citizens of Country Y often take their vacations in Country X, where the exchange rate makes hotels and restaurants more affordable. Yet, citizens of Country Y rarely purchase clothing or electronics in Country X, despite the fact that those items are more expensive in their home country, even when sales taxes are taken into account.

Which of the following, if true, would best explain the buying habits of the citizens of Country Y?


A. Citizens of Country Y prefer the fashions available in their own country. - Incorrect - but it does not explain why Y people don't buy electronics from country X

B. Stores in Country X receive the latest fashions and technology several months after they are available in Country Y. - This does make sense to me. At least in electronics, most people buy the latest ones.

C. The citizens of Country X resent the buying power of the currency of Country Y. - Irrelevant

D. The government of Country Y imposes tariffs on imported goods. - In general, most countries do allow its citizens/visitors to bring a certain amount of new items from abroad. Almost all international airports have duty free stores from which people are allowed to buy up to a certain limit

E. The currencies of Country X and Country Y are both weak compared to the currency of Country Z. - Irrelevant

I chose B . I did not think that an electronic item(s)/clothing bought from abroad will constitute an imported item that will attract import duty/tariff . In my opinion, B and D are equal contenders. Also, in D, we don't know whether the tariff is a significant amount or not. In some cases, even with tariff, buying from Country X might be cheaper.


AjiteshArun , GMATNinja , mikemcgarry , egmat , RonPurewal , DmitryFarber , MagooshExpert , ccooley , ChiranjeevSingh, GMATGuruNY , VeritasKarishma , other experts-- please enlighten

Paradox:
Citizens of Y often take vacations in Country X, where the exchange rate makes hotels and restaurants more affordable.
Yet, they don't purchase clothing or electronics in Country X even though it is cheaper there.

How do we explain this:

A. Citizens of Country Y prefer the fashions available in their own country.
Two problems - it doesn't explain anything about electronics and other goods, just clothes; also, we don't know what is given priority, fashion preferences or cost. I may prefer the clothes from my hometown but I may also prefer cheaper clothes available somewhere else so what wins - price or fashion preference - we don't know. This option needed to mention "... prefer the fashions available in their own country irrespective of cost" to resolve the clothes paradox.

B. Stores in Country X receive the latest fashions and technology several months after they are available in Country Y.
Again, what wins - cost or current trends - we are not sure.
Note that the argument discusses just the monetary factor. People of Y take vacations in X because it is cheaper. But they don't buy the cheaper products of X. I would really like if this paradox is resolved in monetary terms itself. Some unknown piece of monetary information that would resolve the paradox would be best, though not necessary.
If (B) also said that people of Y prefer latest fashions irrespective of cost, then that would resolve my paradox.
I will move ahead hoping to see a better option.

C. The citizens of Country X resent the buying power of the currency of Country Y.
The choices of citizens of X is irrelevant.

D. The government of Country Y imposes tariffs on imported goods.
"import" just means to buy or bring in products from another country. When individual travellers buy products from another country and come back home, they are importing those products. This option tells us that the cost of cheaper goods of X is actually higher since they need to pay import tariffs in their own country. How much is the tariff we don't know but perhaps it makes buying from X unattractive.

E. The currencies of Country X and Country Y are both weak compared to the currency of Country Z.
Country Z is irrelevant.

Answer (D)

Hi VeritasKarishma

According to me the option D goes against the information given in the passage that despite the fact that those items are more expensive in their home country. In CR aren't we supposed to take this information as the universal truth and eliminate any option that goes against this information?

Let me know what I am missing out on.

Warm Regards,
Pritishd

Option (D) is not against the premises.
The premises tell us that clothing and electronics are more expensive in country Y than in country X. But people of country Y don't buy these things from country X. Why?
Option (D) tells us that country Y imposes tariffs on imported goods. So it is likely that the goods become more expensive when they are brought in country Y.

Say a TV costs $1000 in country X and $1200 in country Y (including sales tax etc in both cases). So a person from Y travels to X and sees that the TV is cheaper there. But does it make sense for him to buy it there? Yes, if he doesn't need to pay anything to bring it back to country Y. But what if country Y imposes a tariff of 20% when imported goods are brought in? Then he knows that when he takes the TV to Y, he will need to pay another $200 to customs. So the cost of TV to him will be still $1200 so it doesn't make any sense for him to buy it in country X.
This is what option (D) tells us.

KarishmaB Ma'am,

Just wanted to get my reasoning for option B evaluated.

I eliminated option B on the basis that the stuff comes late to country X, but that does not mean people won't buy that stuff. They can buy the stuff later.
In short, this option does not tell us why people don't buy electronic goods in country X.
The "why" part is missing in this option.

Am I correct in my reasoning?

I would ignore (B) because (D) is available. To an extent, (B) does explain the buying habits. We know that many people do prefer the latest clothes and technology but the use of "rarely" in the argument makes one question the validity of (B). I would think that there needs to be a blanket reason applicable to both clothes and electronics and usually that is price. Option (D) tells us about import duties and that makes complete sense. There would be a substantial number of people who will buy the same thing a few months later at a lower price but almost nobody will buy the same thing at a higher price. Hence, (D) justifies that citizens of Y rarely shop in X.

KarishmaB Ma'am,

Can you please explain option B once again?
Understood in parts. Not getting the hang of this one.
What I understood is that country X receives the goods several months later. Receiving the goods several months later does not mean that they would not buy the goods from country X. They could buy it later. Hence, this does not explain the paradox at hand.

Option D I understood wins over B. People would have to pay import duty and the commodity becomes expensive. Hence, these people don't buy the stuff.

But why not option B?

Clothes and tech upgrade very fast. So say if printed co-ords were in fashion 6 months ago, they would not be today. If iPhone 13 is released today, we might get iPhone 15 in 6 months. How many people will buy the older models and clothes of last season? Some, I agree but many won't. Hence (B) does to an extent explain the reason people don't buy in X but it doesn't explain why people "rarely" (almost never) buy in X. Some people will buy last season clothes and older models of tech if they are available cheaper.
But (D) clarifies it fully. No one will buy the same thing for a higher price so people of Y do not buy in X.