The government of Penglai, an isolated island, proposed eliminating outdoor advertising except for small signs of sta...

shunhe on June 24, 2020

Hi @jingjingxiao11111@gmail.com,

Thanks for the question! So let’s take a look at the stimulus. We’re told that the government of Penglai proposed getting rid of outdoor advertising other than small signs of standard shape. Then some island merchants protested since that would reduce overall volume of business in Penglai. Note here that they’re talking about overall volume of business; this is important. They relied on the fact that businesses that used outdoor advertising had larger market shares than those that didn’t.

OK, so now we’re asked to find an error of reasoning in the merchants’ argument. Take a look at (B), which tells us that the merchants assume without justification that outdoor advertising increased market share by means other than diverting trade from competing businesses. This seems to be what happened. Remember, the merchants on relying on the fact that businesses with outdoor advertising have more market share than those without. But what if the outdoor advertising doesn’t actually CREATE any additional volume, it just redistributes it from businesses without outdoor advertising to businesses with outdoor advertising? If that’s true, then outdoor advertising didn’t actually change overall volume. But that’s the conclusion the island merchants get to; they think that outdoor advertising will decrease overall volume of business. But they don’t consider this alternate possibility, which is a weakness in their argument. And so (B) accurately describes an error of reasoning in their argument, and is the correct answer.

Hope this helps! Feel free to ask any other questions that you might have.

Anna20 on July 18, 2020

I incorrectly picked D, why is D not the correct answer here?

I had understood the issue here to be a term shift, from overall business to market share?

Anna20 on July 24, 2020

Hi @Shunhe - thanks so much for all your help so far with my other questions, very much appreciated and super helpful!

Have just reviewed this question again, and am still not sure I am clear on the flaw?

Emil-Kunkin on June 23 at 08:55PM

I think the flaw here is best understood the merchants making an argument that actually undermines their claim. Market share is a percent, the percent of the total market that each firm has, or that an industry has of the entire economy. The fact that firms or industries that do advertise have a greater market share indicates that they are getting a bigger share of the pie by advertising. However, this says nothing about the size of the pie. The merchants seem to think that ads make the pie bigger, but the evidence they cite could just as easily support the claim that the merely take part of the pie from those that do not advertise.