Exam code: 7132
Which one of these changes is most likely to lead to higher costs and higher demand for a product?
An increase in the rate of inflation
A rise in interest rates
Introducing fair trade principles
More competition
Choose your answer
Was this exam question helpful?
A fashion chain decides to switch to ‘fair trade’ clothing in its shops. Explain one possible consequence for the fashion chain.
How did you do?
Was this exam question helpful?
Daihatsu
Daihatsu is a Japanese manufacturer of small cars. Its customers are now able to customise their vehicles with car panels that they design for themselves online. Until recently customising cars was expensive because it required skilled craftsmen to produce individual parts.
With 3-D printing, panels can be produced quickly and cheaply. Customers ordering a Daihatsu car from their local dealership can design their own panels for the sides of the car to create exactly the look that they want. Offering more customisation is one way that car manufacturers are trying to gain a competitive advantage in a fiercely competitive environment.
Cars are a high value item for consumers and are usually bought on credit; the finance to buy the car is often provided by the manufacturer. In 2016 over 74 million cars were sold worldwide. This represents a global capacity utilisation in the car industry of only 78%. Some commentators predict global capacity utilisation in the industry will fall in the next few years and that many car manufacturers will respond to this situation by price cutting.
Analyse the likely effects of a significant increase in interest rates on the profits of car manufacturers.
How did you do?
Was this exam question helpful?