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Business Studies · May / June 2020 · Paper 22 · Question 4

0450

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  • 4(a)[8]

    Explain how the following four legal controls may affect ES.

    Control over misleading promotion
    Control over faulty products
    Control over location decisions
    Control over pollution Award one mark for each effect (maximum of four). Relevant legal controls might include:
    Misleading promotion: restrictions on claims in adverts about the speed scooters can go or fuel consumption
    Faulty products: consumers have the right to return them to have your money back if the scooter engine has a fault
    Location – restrictions on where to expand the scooter factory
    Pollution – emissions from scooters may mean production has to change Award a maximum of 1 additional mark for each effect applied to this context. For example: Environmental laws may restrict pollution from exhaust fumes (1)

    this may mean ES has to change the engines of its scooters which may increase costs (app).

  • 4(b)[12]

    Consider the effect on ES of the following two economic changes in country Z. Which change is likely to have the biggest effect on ES’s profit? Justify your answer.

    Increasing unemployment
    Increasing inflation Level Description Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of both economic changes. Well-justified conclusion. Candidates discussing both economic changes in detail, in context and with well-justified conclusion including why the alternative change was rejected should be rewarded with the top marks in the band. 9–12 Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of at least one economic change. Judgement with some justification/some evaluation of choice made. Candidates discussing both economic changes in detail and applying it to the case should be rewarded with the top marks in the band. 5–8 Limited application of knowledge and understanding of relevant business concepts. Limited ability to discuss the economic changes with little/no explanation. Simple judgement with limited justification/limited evaluation of choice made. Candidates outlining both economic changes in context should be rewarded with the top marks in the band. 1–4 No creditable response. Relevant points might include: Increasing unemployment
    Lower incomes
    Lower sales on expensive items such as scooters
    However, if scooters are bought instead of cars then sales may be higher
    Easier to recruit employees as larger pool of unemployed workers available to select the additional 100 production workers
    Less pressure on wage rate increases to be well above the legal minimum wage rate Increasing inflation
    Higher supplier costs of components for scooters
    Price of scooter may have to increase – reducing sales
    Less competitive if imported scooters do not have higher prices
    Pressure for wage to be increased to much higher than the legal minimum wage rate – increasing costs
    But all domestic manufacturers face the same problems to so may not be less competitive Conclusion Justification might include:
    Increasing unemployment may lead to lower wage costs and if revenue from the sale of scooters also rises then profit will increase.
    Increasing inflation may make it easier for ES to increase prices on its scooters as consumers expect prices to rise, so revenue increases. Some of its costs will rise as inflation increases but if ES does not increase wages, as unemployment has now started to increase, then profit may still increase.
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