Business (AS & A Level) · May / June 2022 · Paper 23 · Question 1

Child Play (CP) Su is a sole trader who started a business called CP which operates a play area for children. The play area is inside a building and includes toys and other play equipment. Customers book on CP’s website for each hour that they would like to use the play area. CP is two kilometres away from the nearest city which has a large population. Su does not pay for any promotion and she relies on recommendations and reviews from previous customers. Su currently charges a price of $10 an hour for a group of up to 5 children. Only one group can book CP for each hour. Demand is greater than supply so Su may increase the price to $15 per hour. She has completed some market research to see if this is a good idea. Her findings are in Table 1.1. Table 1.1: Market research about prices for CP Price Quantity (hours) demanded per day $10 10 $15 6 Su is also thinking about expanding the business by opening a café targeted at parents with children. The café would be located at the entrance to CP’s play area. There are many other cafés in the city centre two kilometres away. Su believes that product differentiation is essential for the profitability of the café. Su plans to use CP’s working capital as the source of finance to open the new café. The café will need to earn revenue quickly, so she plans to open it in four weeks. She will need quick and low‑cost promotion methods if the café is to succeed. 5 10 15 20

Read automatically from the paper; the printed page above is exact.