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Argument Analysis:

Argument 1:

A product that represents a clear technological advance over competing products can
generally command a high price. Many companies charge the maximum possible price
for such a product because they want to make as much profit as they can and
technological advances tend to be quickly surpassed. The drawback is that large
profits on the new product give competitors an incentive to quickly develop a product
to match the rival product's capabilities. Therefore, the strategy to maximize overall
profits from a new product is to charge less than the maximum price the market will
bear.

Questions
1. Please explain the argument in your language, as if you are explaining to a layman.
2. In which possible scenarios will the argument not hold?
3. What other information will you seek from the author of the argument to increase
your belief in the argument?
Q1) Before we start understanding the argument, lets first read the passage line-byline and break it down.
Sentence
A product that represents a clear
technological advance over competing
products can generally command a
high price.

Many companies charge the maximum


possible price for such a product
because they want to make as much
profit as they can and technological
advances tend to be quickly surpassed.

The drawback is that large profits on


the new product give competitors an
incentive to quickly develop a product
to
match
the
rival
product's
capabilities.

First impressions
The author says that a clear,
technological
advancement
CAN
GENERALLY command a high price. So,
new technological advancements (or
inventions) can be sold at a high price
to the consumers.
But, why does the author say CAN
GENERALLY?...
The author presents a statement and
supports it with a reason (by using the
word because).
The companies charge the maximum
possible price for a clear, technological
advancement. Why?
They want to make as much
profit as they can
Technological
advancements
tend to get quickly surpassed,
i.e. Technological advancements
have a short life-span
The drawback! The author is now
giving a disadvantage to charge the
maximum possible price for such a
product.
What is the drawback?
Large profits on the new product
give competitors an incentive to
QUICKLY
develop
a
similar

Therefore, the strategy to maximize


overall profits from a new product is to
charge less than the maximum price
the market will bear.

product
Consider the word Quickly. Can all
inventions/technologies
be
created
Quickly?
Therefore, --- This is the conclusion
folks!
The author concludes that the strategy
(instead of charging the maximum
possible price) should be to price clear,
technological advance at a price Less
than the maximum price the market
can bear.

Now, we can understand the argument.


The argument deals with the pricing strategy of new, technologically-superior products
in the marketplace. At first, the author states that such advanced products command a
high price in the market. The companies also tend to charge the maximum possible
price for these products because:
i)

ii)

The technological advancements tend to be quickly surpassed. So, a product


which may be technologically superior in the market today, may not remain
so tomorrow. Therefore, there is a short time-frame for companies to
capitalize on their technological inventions.
The companies want to make as much profit as they can.

Now, the author claims that to maximize overall profits from a new product which is
a clear, technological advancement over an existing, competing product the
company should charge less than the maximum price the market can bear. [THE MAIN
ARGUMENT]
Why should the companies do that? Because:
If Company A starts earning too much profit from a new product it developed,
then other Companies would be tempted to develop a similar product which
would match the capabilities of Company As original invention. [THE GIVEN
REASON]
Why is this bad? So what if other companies also develop a product similar to the one
that Company A invented. Because, it can lead to crowding of the marketplace and
increase competition for Company As product. This increased competition would
mean that Company As original product would have to compete with similar products
from rival companies, which may create a dent on Company As sales figures, and
adversely impact its profit. [THE UNSTATED ASSUMPTION]
The argument can be explained in a diagram as under:

Alternate approach:
If I had to explain this argument to someone by using verbal communication only, Id
say the following:
Imagine you are Steve Jobs, and your company has just invented the iPhone. Now
you know that your product is excellent. Technologically, it is head and shoulders
above any other mobile phone in the market right now. How would you price your
product?
Would you put the maximum possible price-tag on it, so that you can earn maximum
profit. You only have a small timeframe before your invention loses its technological
superiority. Wouldnt it make sense to put the maximum possible price-tag on this new
invention. After all, technologically superior products command high prices in the
market.
However, the author of this argument says otherwise. The author states that You
should Not put the maximum possible price-tag, but instead charge a price lower than
what is maximum possible for the market. The author supports the argument by
claiming that if You put the maximum possible price-tag on the new iPhone; and start
earning huge profits out of it, your rival companies (like Samsung, and Nokia) would
get attracted to this large profit opportunity. So, Samsung and Nokia would also start
developing mobile phones which would be technologically similar to what your
company has developed.
The author concludes that in order to maximize your profits, you should keep the price
of the new iPhone low and discourage rival companies from developing a similar
product

Q2) To find the situations in which the argument would not hold true, we need to
attack the base of the argument. As seen in the diagram above, the core argument is
based on a premise and an unstated assumption.
The premise is that large profits on the new product give competitors an incentive
to quickly develop a product to match the rival product's capabilities
Lets attack this premise.
What if, the time taken to develop this technologically advanced product is too large,
and this technological advancement required years of research by the company. In
that case the company would not have to worry about its rival companies QUICKLY
developing a similar product.
So, the first possible scenario where the argument would Not hold True is:
(1) This technologically advanced
development for its formation.

product

required

years

of

research

and

Also, even if we ignore the above possibility, there are more cases where the
argument fails.
What if the product that is developed by the Inventor Company is patent protected,
and hence, cannot be created by rival companies.
Therefore, the second possible scenario where the argument would Not hold True is:
(2) The technologically advanced product is protected by a patent which prohibits
other companies to sell a similar product in the market for the next 5 years.
The most serious criticism is that the author advocates keeping the prices low to
discourage competitors from developing a product with similar capabilities. If it would
be economically unwise for the rival Companies to develop the similar product, then
how would it be economically justified for the Inventor Company to develop that
product and sell it at a lower price point.

Q3) To increase belief in the authors claim, I would seek the following information:
(1) Are the competitors already developing a similar product and would achieve
the same level of technical competency in their product?
(2) Do the rival companies have the same capabilities to develop a similar product?

Argument 2:
In the Drindian Empire, censuses were conducted annually to determine the
population of each village. Village census records for the last half of the 1600s are
remarkably complete. This very completeness makes one point stand out; in five
different years, villages overwhelmingly reported significant population declines.
Tellingly, each of those five years immediately followed an increase in a certain
Drindian tax. This tax, which was assessed on villages, was computed by the central
government using the annual census figures. Obviously, whenever the tax went up,
villages had an especially powerful economic incentive to minimize the number of
people they recorded; and concealing the size of a villages population from
government census takers would have been easy. Therefore, it is reasonable to think
that the reported declines did not happen.

Questions
1. Please explain the argument in your language, as if you are explaining to a layman.
2. In which possible scenarios will the argument not hold?
3. What other information will you seek from the author of the argument to increase
your belief in the argument?
Q1) Before we start understanding the argument, lets first read the passage line-byline and break it down.
Sentence
In the Drindian Empire, censuses were

First impressions
Factual statements being made by the

conducted annually to determine the


population of each village. Village
census records for the last half of the
1600s are remarkably complete.
This very completeness makes one
point stand out; in five different years,
villages
overwhelmingly
reported
significant population declines.

Tellingly, each of those five years


immediately followed an increase in a
certain Drindian tax. This tax, which
was
assessed
on
villages,
was
computed by the central government
using the annual census figures.

Obviously, whenever the tax went up,


villages had an especially powerful
economic incentive to minimize the
number of people they recorded; and
concealing the size of a villages
population from government census
takers would have been easy.

Therefore, it is reasonable to think that


the reported declines did not happen.

author. Census was done annually and


its records for the last half of 1600s are
remarkably complete.
The fact that the census records, for
the last half of 1600s, are complete
highlight something.
On 5 different years, the villages
OVERWHELMINGLY
reported
SIGNIFICANT population decline.
Wonder what happened? Was there a
big war or a drastic famine?
Oh! So, there was a tax that was being
imposed on villages based on their
annual census figures. Each of these 5
years (when the annual village census
figures reported significant population
declines) was immediately followed by
an increase in the census-based tax.
So, the author ASSUMES a direct
correlation
between
the
village
population and the tax rate, i.e. if the
village population is more, then it
would pay more in taxes
So, whenever the tax went up, the
villages had an economic incentive to
report less number of people.
(But, could it be that the author is
confusing
this
Correlation
with
Causation?)
The author also ASSUMES that
concealing the size of villages
population from Government Census
takers would have been easy.
Therefore the conclusion!
Based on above assumption based
reasoning the author concludes that
the
reported
population
decline
(assumed to be for those 5 years) did
Not actually happen.

Now, we can understand the argument.


The argument deals with the curious case of population declines during 5 different
years in the Drindian Empire.
At first, the author states that an annual census was conducted in the Drindian Empire
to determine the population of the villages. The author also states that the census
records for the last half of 1600s are remarkably complete.
Now, the author states that because these records were remarkably complete, an
interesting observation was made for 5 different years. The observation was that there

was a significant
OBSERVATION]

population

decline

reported

during

these

years.

[THE

The author states that Each of these significant population declines were reported
after an increase in a Drindian Tax. This particular Drindian Tax was levied on the
villages based on their annual census figures. The author argues that this particular
census-based tax, gave a powerful monetary motive to the villages to minimize their
population figures. [THE REASON/PREMISE]
The author, apparently, assumes that if less number of people are reported in the
census figures, then relatively less tax would be levied on that village. [ASSUMPTION
#1]
The author also assumes that concealing the size of the villages population from the
Government census takers would have been easy. [ASSUMPTION #2]
Hence, the author concludes that these reported population declines; during the 5
different years, did not actually happen.
The argument can be explained in a diagram as under:

Q2) The major flaw with the above argument is that it suffers from CorrelationCausation fallacy. Just because significant population declines were reported in 5
different years after the census-based tax was increased, it does not necessarily mean
that it was the tax increase was the cause as well.
So anything that exploits this fallacy would weaken the argument.
For eg:
(1) The census-based tax was increased only when catastrophic natural disasters
which caused significant damage to life and property - struck the Drindian

Empire (puts the blame of population decrease on deaths caused by natural


disasters).
(2) During 4 out of the 5 different years; in which the census-based tax was
increased, the Drindian Empire suffered heavy losses in wars with the Mackneys
Empire.
Or, if significant reduction in population was a general trend during the Drindian
Empire. For eg:
(3) During the reign of the Drindian Empire, the population of the Empire; during
the last half of 1600s, declined from 80 million to 30 million.
Also, the argument would not hold true if it was found that the census-based tax was
increased on more than 5 different occasions, and the census reported higher
population in a year when tax was increased.
For eg:
(4) Between its introduction in 1554 and until the fall of the Drindian Empire in
1600, the census-based tax was increased during 15 different years. During
most of these 15 different years the Empire enjoyed a boom in population.
The argument can also be weakened, if it was ascertained that the Government
system was accurate in tracking census/population figures, or if the Government also
had other avenues to determine its population.
For eg:
(5) The administration during Drindian Empire was far ahead of time when
compared to other Empires during that period. For instance, the Drindian
Government had mandated the issuance of birth and death certificates of its
citizens.
If the Government could track deaths by issuing death certificate, then the villages
could not conceal the actual population figures from the Government.

Q3) To increase belief in the authors claim, I would seek the following information:
(1) Were there any other events like wars, natural disasters, epidemics which
could cause a significant decline in population during the 5 different years?
(2) What was the percentage change in the population reported by villages during
the years when the census-based tax was decreased?
(3) What was the average, overall percentage change in the population of the
Drindian Empire during the time when the annual census was conducted?
(4) Was the census-based tax increased only on 5 different years in the last half of
1600s? If no, then do the census figures show the similar, overwhelming decline
for the remaining years as well.
(5) Did almost all the villages in the Empire reported a significant population
decline on the 5 occasions when the census-based tax was increased?