Retail Analyst: Over the past five years, our chain of sporting goods stores has seen a 10 percent increase in profits each year. We have not changed our management team or our marketing strategy during this period, and we plan to keep both exactly the same for the next five years. Thus, our chain is guaranteed to see a 10 percent increase in profits each year for the next five years.
Which one of the following most accurately describes a flaw in the retail analyst's reasoning?
- unjustifiably assumes that a trend observed over a specific past period will continue into the future merely because certain internal factors remain unchangedAnswer
- Bassumes a causal relationship between the stability of the management team and the increase in profits, when both could simply be coincidental
- Cassumes that factors which are necessary for the stores' past success are also sufficient to ensure similar success in the future
- Duses the term 'profits' in two different senses throughout the course of the argument
- Eignores the possibility that a 10 percent increase in profit represents a smaller absolute financial gain now than it did five years ago
Answer
The correct answer is the option stating that the argument unjustifiably assumes a past trend will continue into the future merely because certain internal factors remain unchanged.
The argument concludes that profits will continue to grow at 10 percent annually for the next five years simply because the management and marketing strategy will not change. This reasoning is flawed because it assumes that static internal conditions guarantee the continuation of a past trend, failing to account for external variables (such as market saturation, new competitors, or broad economic shifts) that could change over time.
Step-by-Step Solution
Key Concept
Time Shift Flaws (Past vs. Future)