Economic Development Director: To combat a multi-year decline in consumer foot traffic in the historic Riverside shopping district, the city implemented a "Tax-Free Tuesday" initiative six months ago, eliminating local sales tax on all retail purchases made on Tuesdays. Since the initiative began, total retail revenue in the Riverside district during the traditional Monday-through-Friday workweek has surged by 18 percent compared to the prior six months. This surge clearly demonstrates that the tax-free initiative has successfully attracted a substantial number of new shoppers to the district.
Which of the following, if true, most seriously weaken the director's argument? Select all that apply.
- Consumers who previously did all their shopping in the Riverside district on weekends have overwhelmingly shifted their shopping trips to Tuesdays to benefit from the tax exemption.Answer
- Six months ago, the Riverside district's merchants association mandated a district-wide 20 percent price increase on all retail goods to fund historical preservation efforts.Answer
- CMost of the retail businesses in the Riverside district sell high-priced luxury goods, making the elimination of the local sales tax a highly lucrative financial incentive for consumers.
- DThe multi-year decline in consumer foot traffic that originally prompted the initiative was significantly less severe than the economic development director initially reported.
- EThe local sales tax exemption does not apply to wholesale transactions, commercial real estate leases, or personal services within the Riverside district.
Answer
The correct options are the one indicating that existing weekend shoppers shifted their visits to Tuesdays, and the one stating that a district-wide 20 percent price increase was implemented.
The argument rests on the assumption that an increase in weekday retail revenue must be the direct result of a substantial number of *new* shoppers arriving in the district. The correct choices attack this assumption by providing alternative explanations for the revenue increase. The option regarding weekend shoppers shifting to Tuesdays explains the weekday revenue surge without any new shoppers being added to the district's overall traffic. The option regarding the 20 percent price increase demonstrates that the 18 percent revenue increase could easily occur even if the actual number of shoppers remained flat or declined, since total revenue is a product of both price and volume.
Step-by-Step Solution
Key Concept
Identifying alternative explanations for causal claims and distinguishing between related but distinct metrics (e.g., revenue vs. foot traffic, weekday vs. overall week).