Edexcel the role of Business Enterprise

Edexcel GCSE Business new spec:1.1.3 the role of business enterprise from Revisionstation

Interest rates

Interest rates rise...

Consumer; it is now more expensive to borrow and so the consumer will buy less.

What will the business do?

The business might drop price OR increase marketing to sell more OR offer CREDIT OR...cut costs...or find new markets.

What will happen to the exchange rate?

This will rise so...exports are now more expensive. Imports are cheaper.

Globalisation

Remember this:

Free flow of goods and services between countries due to the reduction in trade barriers. Creation of an environment for flow of capital and investment among countries. 
Free flow of technology from one country to another

Now...what are the advantages an disadvantages???

Benefits / Gains from Globalisation

1. Encourages producers and consumers to benefit from deeper division of labour and economies of scale

2. Competitive markets reduce monopoly profits and incentivise businesses to seek cost-reducing innovations

3. Enhanced growth has led to higher per capita incomes – and helped many of poorest countries to achieve faster economic growth and reduce extreme poverty measured as incomes < $1.90 per day 

4. Advantages from the freer movement of labour between countries

5. Gains from the sharing of ideas / skills / technologies across national borders

6. Opening up of capital markets allows developing countries to borrow money to over a domestic savings gap

7. Increased awareness among consumers of challenges from climate change and wealth/income inequality

8. Competitive pressures of globalisation may prompt improved governance and better labour protection

Drawbacks / Risks of Globalisation

1. Inequality: Globalisation has been linked to rising inequalities in income and wealth. Evidence for this is the growing rural–urban divide in countries such as China, India and Brazil. This leads to political and social tensions and financial instability that will constrain growth. Many of the world’s poorest people do not have access to basic technologies and public goods. They are excluded from the benefits.

2. Inflation: Strong demand for food and energy has caused a steep rise in commodity prices. Food price inflation (known as agflation) has placed millions of the world’s poorest people at great risk.

3. Vulnerability to external economic shocks – national economies are more connected and interdependent; this increases the risk of contagion i.e. an external event somewhere else in the world coming back to affect you has risen / making a country more vulnerable to macro-economic problems elsewhere

4. Threats to the Global Commons: Irreversible damage to ecosystems, land degradation, deforestation, loss of bio-diversity and the fears of a permanent shortage of water afflict millions of the world’s most vulnerable

5. Race to the bottom – nations desperate to attract inward investment may be tempted to lower corporate taxes, allow lax health and safety laws and limit basic welfare safety nets with damaging social consequences

6. Trade Imbalances: Global trade has grown but so too have trade imbalances. Some countries are running big trade surpluses and these imbalances are creating tensions and pressures to introduce protectionist policies such as new forms of import control. Many developing countries fall victim to export dumping by producers in advanced nations (dumping is selling excess output at a price below the unit cost of supply.)

7. Unemployment: Concern has been expressed by some that capital investment and jobs in advanced economies will drain away to developing countries as firms switch their production to countries with lower unit labour costs. This can lead to higher levels of structural unemployment.

8. Standardisation: Some critics of globalisation point to a loss of economic and cultural diversity as giant firms and global multinational brands dominate domestic markets in many countries.

9. Dominant global brands – globalisation might stifle competition if global businesses with dominant brands and superior technologies take charge of key markets be it telecommunications, motor vehicles and so on.

Year 9 2016

The full marking guidelines

Year 9 2016 paper. Marking guidelines.

3 (a)

1 mark for correct way (AO1), plus one mark for development/description (AO2) 

Apply twice to give a mark out of 4. 

Possible answers include 

• greater range of goods 

• better quality/esteem products 

• lower prices (exchange rate can be used as an explanation – not as a reason - if correctly applied and clearly linked to benefits to UK consumers) 

Examples 

International trade means there is a bigger range of goods available to consumers (1) International trade will open up competition (1) and result in prices of goods falling (1).

3 (b)

Possible answers include 

• foreign made components become more expensive 

• overseas sales should increase as watches appear cheaper in foreign currencies 

• UK sales should increase as foreign competitors become more expensive to UK buyers 

• It will be more expensive for UK watch producers to pay for overseas advertising and other selling costs paid for in local currencies.

3 ( c )

Arguments that might be used: 

• UK watch makers lose sales if reputation of watches falls 

• keeps prices affordable to UK consumers 

• opportunity for poorer countries to develop 

• encourages sweatshops/crime etc 

• poorer quality/some products dangerous 

• genuine businesses close with loss of jobs 

• cost to Government of enforcing counterfeit goods 

• loss of exclusivity of product reduces demand.

Judgement is being made in relation to the conclusion made 

A clear judgement is one that follows logically from the arguments raised elsewhere in the response. The judgment made is unambiguous and realistic with the candidate having articulated the reason(s) for his/her particular choice, rather than leaving it to the examiner to infer the reason(s).

Year 9 2016 Marking Guidelines

2 (c)

Issues with increasing minimum wage 

• would increase consumption – multiplier effect 

• knock on effect eg wages Taylors pay may need to increase 

• discourage employers creating jobs 

• would increase the incentive effect to find work. 

Issues with reducing benefits 

• backward multiplier 

• turn to crime to fund living 

• only works if jobs are available 

• increases government resources eg money available to spend elsewhere

Judgement is being made in relation to the conclusion made 

A clear judgement is one that follows logically from the arguments raised elsewhere in the response. The judgment made is unambiguous and realistic with the candidate having articulated the reason(s) for this particular choice, rather than leaving it to the examiner to infer the reason(s).

Year 9 June 2016 Marking guidelines

2 (a)

1 mark (AO1) for each correct wage deduction – maximum 2 marks 

Possible deductions include 

• income tax/PAYE 

• national Insurance 

• student loan payments 

• pension contribution 

• loan repayment 

• rent 

• court fine. 

NB ‘Tax’ is acceptable but this must not refer to an incorrect tax (eg VAT, corporation tax)

2 (b)

1 mark for identifying factor + 1 mark for development/explanation 

Apply twice. 

Possible answers include 

• minimum national wage/living wage 

• wages paid in similar shops 

• experience and skills of assistants 

• antisocial hours eg evening/weekend working 

• willingness of employees to accept this wage 

• motivational factors 

• how much can shop afford to pay. 

Example 

Her parents probably looked at what assistants in similar shops were paid (1). If the Taylors gave less than this, they might not attract the employees (1).

ASDA suffer a loss

Asda has reported falling sales for an 11th quarter in a row as it continues to lose ground to its rivals.

The UK's third biggest supermarket revealed sales in the three months to end of March fell 2.8% on a like-for-like basis.

It was a slight improvement on the previous quarter, but analysts warned more work was needed.

By contrast, Asda's parent company, Walmart, revealed a 1.4% rise in like-for-like sales in its native US market.

No complacency

Asda's latest fall was nowhere near as bad as the 7.5% drop in quarterly sales that it reported in August last year, and was slightly better than the 2.9% decline seen in the final three months of 2016.

But chief executive Sean Clarke admitted more needed to be done to recover.

He said: "We're pleased that the momentum of Q4 has continued into the New Year with a third consecutive quarter of improvement.

"Despite this progress we are in no way complacent and there is still much for us to do."

Read more

Facebook fined!

Facebook has been fined 110m euros (£95m) by the EU for providing "incorrect or misleading" information during its purchase of messaging service WhatsApp in 2014.

The European Commission said Facebook had said it could not automatically match user accounts on its own platform and WhatsApp.

But two years later it launched a service that did just that.

Facebook said the errors it had made were not intentional.

'Clear signal'

In a statement, the Commission said: "The Commission has found that, contrary to Facebook's statements in the 2014 merger review process, the technical possibility of automatically matching Facebook and WhatsApp users' identities already existed in 2014, and that Facebook staff were aware of such a possibility."

However, it added that the fine would not reverse its decision to clear the $19bn purchase of WhatsApp and was unrelated to separate investigations into data protection issues.

Read more

June 2016 Year 9

1 (e)

Areas for possible discussion with loan 

• can earn extra money straightaway from weddings etc 

• interest would be £480 in first year (less in subsequent years) 

• paying off on time will help her credit history 

• could pay off in about 2 years. Areas for discussion on savings 

• interest rates might rise – issue if not fixed term 

• good money management practice for future 

• car prices are falling 

• cash purchase may give better deal

Judgement is being made in relation to the conclusion made 

A clear judgement is one that follows logically from the arguments raised elsewhere in the response. 

The judgment made is unambiguous and realistic with the candidate having articulated the reason(s) for this particular choice, rather than leaving it to the examiner to infer the reason(s).

June 2016 Year 9

1 (d)

Possible answers include 

• cost of running the car will reduce her ability to save and buy other things 
• her income should increase because she can perform at more weddings 
• may need to put side contingency funds in case of unforeseen repairs etc 
• could delay future income as she cannot buy the violin. 

Examiners must annotate the level selected eg L1 or L2 

Example Camilla should find she is bringing in more income (L1). She will no longer have to rely on her parents taking her to gigs (L2 -2) 

This means she can look further afield for jobs knowing she will always be able to get there without worrying about her parents (L2 – 3)

June 2016 Year 9

1 (c)

Possible answers include 

• interest rate increases cause higher mortgage payments so households have less disposable income 

• price of new cars has gone down. 

This causes people to buy more new cars, putting more old cars on the market increasing the supply of used cars and lowering the price 

• more attractive to save money so demand for second hand cars falls 
• cost of running a car goes up (eg fuel, insurance) so less people want to own cars 
• price of new cars fall eg increased competition, reducing value of second hand cars. 

• Improvements in technology/reductions in production costs 
• strengthening of the economy (and increasing demand for new cars) 

NB: Assume in context unless the answer is discussing alternative unrelated markets NB: Do not allow depreciation or ‘wear and tear’ as an argument 

Example 

The price of new cars has fallen (L1) this means that people will now be able to afford to buy a new car rather than a second hand one (L2 – 2). The price of used cars will fall because there are less people wanting to buy these used cars (L2 – 3)

Year 9 June 2016 Personal Economics

Question 1

1 (a) pt 1

Answer: 1 mark awarded for box 3: An alternative item that has to be given up 2 or 3 ticks – zero marks

1 (a) pt II

Answer: 1 mark awarded for box 2: Being unable to buy a new violin 2 or 3 ticks – zero marks

1 (b)

Possible answers include 

• it increases the debt she already has 

• believe prices will fall so will be cheaper in future 

• opportunity for her to buy the violin instead 

• running costs will be high (eg insurance, petrol). 

One mark for correct factor (AO1), plus one mark for development/description (AO2) Apply twice. 

NB: Do not allow running costs (eg insurance and petrol costs) for both reasons 

Do not credit falling prices for both reasons even if explanations are different

Year 9 June 2013 marking guidelines

3 (a)

For each reason: 

One mark for identifying a reason plus 1 mark for an explanation 

Possible answers 

 only buying local produce means costs of food items are likely to be higher, he won’t buy from the cheapest source if it involves long distances of transport 

 organic food is more expensive as chemical fertilizers etc cannot be used to increase yields 

 also allow other reasonable actions that an ethical business might take – eg paying staff more than other restaurants, donating to charity – to maintain its ethical standing.

3 (b)

Possible answers 

 a fall in the value of the pound would encourage foreign visitors to come to the UK as they would get more sterling for their own currency. This might increase the number of overseas’ customers at Robbie and Pascal’s restaurant and increase its profits 

 a fall in the value of the pound would make food brought from abroad more expensive for Robbie and Pascal to buy. This would increase the restaurant’s costs and reduce its profits 

 a fall in the value of the pound could make it more expensive for competing restaurants who buy most of their food from abroad. They might need to raise their prices and become less competitive. Robbie and Pascal’s restaurant uses mostly local produce so their costs would not be greatly affected. The restaurant might become more competitive and increase its profits.

3 (c)

The following issues may be considered: Benefits of allowing students to stay 

 will add to stock of highly educated workforce 

 students who come to UK likely to be more enterprising eg Pascal wanted to start a business 

 likely to be high earners so will pay tax to government. Downside of allowing students to stay 

 some believe UK is already over-populated 

 might encourage proliferation of ghost college courses as a means of allowing economic migrants to UK. 

Do not reward anything of a racist nature 
NB residency restrictions do not apply to EU citizens  

How rich are you?

Click and find out

Year 9 June 2013 marking guidelines

2 (a)

One mark for identifying a reason plus one mark for explaining the reason 

Possible reasons include: 

 job satisfaction from this type of work, possibly more creative/higher status 

 could be better paid 

 chance to become a celebrity chef!.

2 (b)

Possible reasons include: 

 risk – Brendan expects a higher reward for the uncertainty of his work 

 legality – Brendan’s work in on the fringes of legality, probably doesn’t pay tax etc 

 training – Ali is receiving training that may allow him to earn more than Brendan in the future. 

2 (c)

The following issues may be considered: Arguments for studying for a degree: 

 potential for much greater earning during someone’s lifetime 

 provides more ‘theoretical’ background than employment in restaurant could give 

 personal satisfaction of studying a subject the person enjoys 

 increases employability. Arguments against studying for a degree: 

 costs involved – takes several years to recoup university fees etc and ‘catch up’ with earnings 

 is studying for degree in catering and hospitality likely to be seen as a valid experience by employers? 

 misses out on practical experiences working in a restaurant. 

 many successful entrepreneurs do not have a degree

Year 9 June 2013 Marking Guidelines

1 (c)

Possible reasons include 

 many builders in the town so competition brings down prices in order to gain the job 

 high unemployment would bring down wages lowering firms’ costs allowing lower prices 

 recession has reduced work so builders price low to attract customers.

 1 (d)

Possible suggestions/reasons include: 

 Savings – high interest rates make it more attractive to save their inheritance so less likely to buy the house 

 Mortgage – if they already have a mortgage, high interest rates mean higher repayments so less likely to buy house 

 Recession – low interest rates could be an indication of a recession so they might be reluctant to buy a house in a falling market 

 House prices – low interest rates could stimulate demand for houses, pushing up the price of houses making it a worthwhile investment.

1 (e)

The following issues may be considered 

 the opportunity costs of giving up a rate of interest - £3000 a year in lost interest 

 the risks involved in buying a house to be looked after by an 18 year old 

 additional running costs eg unexpected repairs 

 could help Robbie get on the property ladder so would be a good thing 

 could prove to be a good investment with lodgers paying to stay there 

 whether it is right that Robbie receives his lodgers’ rent – rather than his parents.  

Year 9 June 2013 marking guidelines

1 (b)

Possible answers include: 

 less likely to spend more than he has/avoids additional debt 

 help prioritise his spending according to importance eg paying bills first 

 process is good self-discipline for the future 

 appease his mother/encourage her to buy the house. 

Examples Robbie is less likely to get into debt (1) because he can see how much he needs to pay his bills when they arrive (This is not in context and would only be awarded one mark despite explanation being present). If he draws up a budget this will please his mother (1) which means she is more likely to go ahead and buy the house saving Robbie paying rent (1). 

Year 9 June 2013 marking guidelines

1 (a)

Possible factors could appear within the following categories: 

 Income 

 Items of expenditure 

 Savings 

 Loans/repayment of debt 

 Other factors – such as preferences/lifestyle factors. 

Two answers from the same category should only be awarded one mark (e.g. two items Robbie will spend money on would only get 1 mark)

Year 9 June 2011 past paper

3 ( c)

3 (c) Alan is not sure whether to buy:  the cheapest imported office furniture  the imported office furniture with the logo  the local, hand-made office furniture. Which office furniture do you think he should buy? Give reasons for your answer. (12 marks)

Possible arguments might include: 

Cheapest imported office furniture – Alan can save money which is important as he is still short of money and may need every penny to get his business set up. Office furniture is not that important. Buying cheap imports will provide employment and income for those possibly in poorer countries. 

But buying cheap imported furniture may encourage deforestation in the countries where the timber is produced. 

Imported office furniture with the logo – might be the best compromise – the timber may cost more but the wood comes from managed forests. If he buys this furniture it will help to encourage responsible management of forests abroad and help the environment. But it is more expensive – Alan has to consider the higher costs for his business. 

Local, hand-made office furniture 

This is the most expensive – does Alan really need such well-made furniture at home? However, it would support local business and provide employment. There is a smaller carbon footprint as furniture is not being imported and the wood comes from UK managed forests – which is good for the environment. 

Marker’s note: 

The Item assumes Alan is buying furniture just for his business. Some candidates may assume that his business is buying/selling office furniture. 

Either interpretation is acceptable.

To get full marks:

Candidate offers advice with clear justification. Ideas are communicated using a logical structure, with some appropriate use of technical terms. There are occasional errors in accepted conventions of written communication.