For a consumer product such as a television, careful pricing is a very important aspect of marketing, since priding an...

GMAT Critical Reasoning : (CR) Questions

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Critical Reasoning

Inference

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For a consumer product such as a television, careful pricing is a very important aspect of marketing, since priding an item even slighty too high or too low can seriously reduce profits. By contrast, voter approval of government projects that benefit the public does not vary with small differences in estimates of their projected cost.

The statements above, if true, best support which of the following as a conclusion?

Most people are well informed about the prices of consumer products.

The demand for projects that benefit the public is more closely tied to standard measures of the condition of the national economy than is the demand for consumer products.

Anyone wishing to increase or decrease voter support for projects that benefit the public should not focus on small cost differences.

Many people place higher priority on funding projects that benefit the public than on buying consumer products for their households.

The purchase of consumer products such as televisions can be postponed more easily than can expenditures for projects that benefit the public.

Solution

Passage Visualization

Passage Statement	Visualization and Linkage
"For a consumer product such as a television, careful pricing is a very important aspect of marketing, since pricing an item even slightly too high or too low can seriously reduce profits."	Establishes: Consumer product pricing sensitivity Concrete Example: TV optimal price: $500 Price at $520 (+$20): Profits drop 25% Price at $480 (-$20): Profits drop 30% Price at $500: Maximum profits achieved Key Insight: Small price variations ($20 = 4% change) create large profit impacts
"By contrast, voter approval of government projects that benefit the public does not vary with small differences in estimates of their projected cost."	Establishes: Government project approval insensitivity Concrete Example: Bridge project base estimate: $10 million Cost at $10.2M (+$200K): 65% voter approval Cost at $9.8M (-$200K): 64% voter approval Cost at $10M: 65% voter approval Key Insight: Small cost variations ($200K = 2% change) create minimal approval changes
Overall Implication	Core Pattern Revealed: Consumer markets show high sensitivity to small price changes, while public sector approval shows low sensitivity to small cost changes. Implication: The decision-making mechanisms and sensitivity thresholds operate fundamentally differently between commercial consumer markets and public sector project approval processes.

Valid Inferences

Inference: Pricing precision requirements differ significantly between consumer products and government projects.

Supporting Logic: Since consumer product profits are seriously reduced by even slight pricing errors, careful pricing becomes critically important for commercial success. Since voter approval for government projects remains stable despite small cost estimate variations, the same level of pricing precision is not required for public sector project approval. Therefore, different sectors require different approaches to cost presentation and pricing strategy.

Clarification Note: The passage establishes that sensitivity levels differ between these contexts, but does not explain why this difference exists or suggest that either approach is superior to the other.

Answer Choices Explained

Most people are well informed about the prices of consumer products.

This doesn't follow from the passage. The passage tells us that small price changes affect profits, but this could be due to market sensitivity rather than consumer knowledge. People could be price-sensitive without being well-informed about actual prices. The passage doesn't provide information about consumer knowledge levels.

The demand for projects that benefit the public is more closely tied to standard measures of the condition of the national economy than is the demand for consumer products.

The passage makes no comparison between how economic conditions affect demand for public projects versus consumer products. We only learn about sensitivity to cost/price differences, not about broader economic factors.

Anyone wishing to increase or decrease voter support for projects that benefit the public should not focus on small cost differences.

This directly follows from the passage. Since we're told that 'voter approval of government projects that benefit the public does not vary with small differences in estimates of their projected cost,' it logically follows that focusing on small cost differences would be ineffective for influencing voter support. This is a valid inference.

Many people place higher priority on funding projects that benefit the public than on buying consumer products for their households.

The passage compares price/cost sensitivity between these sectors but says nothing about people's relative priorities or preferences between public and private spending. This goes beyond what we can infer.

The purchase of consumer products such as televisions can be postponed more easily than can expenditures for projects that benefit the public.

The passage discusses pricing sensitivity but provides no information about the timing flexibility or postponement options for either type of purchase. This inference isn't supported by the given information.

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