The value of a product is determined by the ratio of its quality to it

Question

The value of a product is determined by the ratio of its quality to its price. The higher the value of a product, the better will be its competitive position. Therefore, either increasing the quality or lowering the price of a given product will increase the likelihood that consumer will select that product rather than a competing one.

Which of the following, if true, would most strengthen the conclusion drawn above?

(A) It is possible to increase both the quality and the price of a product without changing its competitive position.

(B) For certain segments of the population of consumers, higher-priced brands of some product lines are preferred to the lower-priced brands.

(C) Competing products often try to appeal to different segments of the population of consumers.

(D) The competitive position of a product can be affected by such factors as advertising and brand loyalty.

(E) Consumers’ perceptions of the quality of a product are based on the actual quality of the product.

KarishmaB · Accepted Answer

Value = Quality/Price

Higher value, better competitive position (so if it has higher value, its more competitive)

Conclusion: Either increasing the quality or lowering the price of a given product will increase the likelihood that consumer will select that product rather than a competing one.

What will strengthen it? Will increasing quality or lowering price make people prefer the product?

(A) It is possible to increase both the quality and the price of a product without changing its competitive position.

Doesn't matter. What we know is the increasing value will improve competitive position. We want to strengthen that improving value will make consumers prefer the product. 
How the competitive position can be kept constant is irrelevant to us. We want to know what happens when the competitive position improves.

(B) For certain segments of the population of consumers, higher-priced brands of some product lines are preferred to the lower-priced brands.

Does not strengthen our conclusion. We want to say that reducing price makes people prefer the product.

(C) Competing products often try to appeal to different segments of the population of consumers.

Then the concept of competitive position does not make sense. This option doesn't work with our argument.

(D) The competitive position of a product can be affected by such factors as advertising and brand loyalty.

What other factors can impact competitive position is irrelevant.

(E) Consumers’ perceptions of the quality of a product are based on the actual quality of the product.

Correct. We are claiming that improving quality or reducing price will make people prefer the product. But what if consumer's perception of quality is based on price? What if lowering price makes people think that the product's quality is lower? For people to prefer the product, their perception of quality should be based on actual quality. Price is not ambiguous anyway. Then the increase in value will be perceived by the customers and they will prefer it.

Answer (E)

IanStewart · Answer

Yes, this should be E. Part of the stem says, paraphrasing: "if you can increase the quality of a product, consumers will be more likely to buy it". Well, it's not enough to make the product better - consumers need to *know* the product is better. That's what E is saying.

egmat · Answer

Solution

Passage Analysis

The value of a product is determined by the ratio of its quality to its price. 
 -Value of a product is defined as quality/price.  
 
The higher the value of a product, the better will be its competitive position. 
 -As value increases, the competitive position gets better.

Therefore, either increasing the quality or lowering the price of a given product will increase the likelihood that consumer will select that product rather than a competing one. 
 -Thus, increasing quality or decreasing price will increase the chance of being purchased over a competing product.

Prethinking

The  conclusion  is: Either increasing the quality or lowering the price of a given product will increase the likelihood that consumers will select that product rather than a competing one.

Strengthen framework

What new information will increase our belief in this conclusion given that 
Value of a product=Quality/price 
Value is directly proportional to a better competitive position

Strengthener 1

The perceived value of the product by the customer is not significantly lower than the actual value.

Strengthener 2

Consumers’ perceptions of the quality of a product is in line with the actual quality of the product.

Answer Choice Analysis

(A) It is possible to increase both the quality and the price of a product without changing its competitive position. 
 -This being possible does not affect the conclusion in any way. Hence it is irrelevant.

(B) For certain segments of the population of consumers, higher-priced brands of some product lines are preferred to the lower-priced brands. 
 -The preferences of certain segments of consumers do not change the general rule. Therefore, this option is irrelevant.  
 
(C) Competing products often try to appeal to different segments of the population of consumers. 
 -Who the products appeal to is also irrelevant to the conclusion. What we are bothered about is the value and the product’s competitive position.

(D) The competitive position of a product can be affected by such factors as advertising and brand loyalty. 
 -Other factors affecting competitive position do not say anything about the impact of quality and price. Hence, this option is irrelevant. 
 
 (E) Consumers’ perceptions of the quality of a product are based on the actual quality of the product.  
 This option is in line with strengthener #2. Hence it is the right answer.

shanewyatt · Answer

Has to be E. The potential buyers of the product have to know the quality of the product to determine the value of the product (value = quality/price).

DVM · Answer

There are two sides of the deal. Producer and customer.

Producer plays with quality & price, so that the product has the best competitive position.

Consumer bases the decision to buy on quality and price perception.

You need some link to connect these two statements. (E) perfectly connects actual quality, set by producer, with its perception by customer.

redjam · Answer

Here's my justification for E.

(A) It is possible to increase both the quality and the price of a product without changing its competitive position.  - The conclusion states you either increase the quality or lower the price, not both. Although you can change both, it's out of scope for the purposes of the conclusion

(B) For certain segments of the population of consumers, higher-priced brands of some product lines are preferred to the lower-priced brands.  - This could weaken the conclusion. If some consumers make purchasing decisions purely on higher price then lowering the price will decrease the likelihood of some consumers selecting the product.

(C) Competing products often try to appeal to different segments of the population of consumers.  - This is irrelevant to the conclusion. We're not talking about price or quality in this answer.

(D) The competitive position of a product can be affected by such factors as advertising and brand loyalty.  - This weakens the conclusion. If other factors affect the competitive position then increasing the quality or decreasing the price could have no effect.

(E) Consumers’ perceptions of the quality of a product are based on the actual quality of the product.  - Correct answer. An assumption in the argument is the increase in quality is actually observed and noticed by the consumer. This validates the assumption and therefore strengthens the argument.

dave13 · Answer

The value of a product is determined by the ratio of its quality to its price. The higher the value of a product, the better will be its competitive position. Therefore, either   increasing the quality or lowering the price of a given product   will increase the likelihood that consumer will select that product rather than a competing one.

the key part is in  red .

say consumers give rating 7 out of 10 to quality of some product. So either quality rating should be increased or the price of this product decreased

Hence, consumers’ perceptions of the quality of a product are based on the actual quality of the product.

hence E is clear winner.

(E) Consumers’ perceptions of the quality of a product are based on the actual quality of the product.

NinetyFour · Answer

My reasoning is as follows:

V = Q/P, increase V means increase in competitive position. thus we must increase Q or lower P. Pre-thinking here would be along the lines of if we increase Q we can keep P the same or vice versa.

A) This actually weakens the conclusion. If it's unchanged that means the conclusion falls apart.
B) Irrelevant, in our conclusion we're talking about the entire population not certain segements
C) Ireelevant to our conclusion
D) Irrelevant again because we only care about Price to Value
E) CORRECT, although this wasn't what we though in our pre-think, it makes a lot of sense. If we said the quality of a product is subjective, then the entire conclusion would fall apart since we won't be able to accurately get a product's true value.

Ashma · Answer

Hi ,
(A) It is possible to increase both the quality and the price of a product without changing its competitive position.

by increasing both quality and price of the product proportionately by keeping value of the product same as earlier is possible, hence achieving unchanged market position.

GMATNinja  please state the reason why, (A) is incorrect?
Thank you

SnorLax_7 · Answer

Hi  MartyMurray   KarishmaB   DmitryFarber

if the conclusion stated " Therefore  only  either increasing the quality or lowering the price of a given product will increase the likelihood that consumer will select that product rather than a competing one."

Then Option A would be strengthener ? otherwise its not ?

Am I correct ? Please help

MartyMurray · Answer

If "only" were added, (A) would in a way provide a slight amount of support for the conclusion. However, since (A) basically follows logically from the statements in the passage, it would not strengthen this particular argument because we can already infer (A) without it being directly stated.

After all, if it's true that " The value of a product is determined by the ratio of its quality to its price," and that "The higher the value of a product, the better will be its competitive position," then it follows that "It is possible to increase both the quality and the price of a product without changing its competitive position," since, if both price and quality increase, the ratio of quality to price may not change.

SnorLax_7 · Answer

MartyMurray , Thanks for the kind response !

muskang2000 · Answer

(E) Consumers’ perceptions of the quality of a product are based on the actual quality of the product.

If actual quality is not considered, then the company can very well advertise about the good quality without really lowering the price. But if the consumer's perception is based on actual quality, then there is no gimmick involved and thus increasing the quality or lowering the price of a given product will increase the likelihood that consumer will select that product rather than a competing one.

The value of a product is determined by the ratio of its quality to it

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