Exam code: 7132
Syllabus Edition
First teaching 2023
Last exams 2027
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
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Statement 1: 'A rise in interest rates is likely to increase consumer spending on credit.'
Statement 2: 'A rise in interest rates is likely to increase the costs of a business with significant borrowings.'
Read statements 1 and 2 and select the correct option below.
Statement 1 is true. Statement 2 is true
Statement 1 is true. Statement 2 is false
Statement 1 is false. Statement 2 is true
Statement 1 is false. Statement 2 is false
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A fashion chain decides to switch to ‘fair trade’ clothing in its shops. Explain one possible consequence for the fashion chain.
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Halvers Hardware is one of around 40 independent hardware shops in its city. None of the shops holds a significant share of the market.
Explain one way the level of competition in this market is likely to affect Halvers Hardware's costs.
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Northbeck Oat Co. produces oat milk. The UK oat-milk market has grown rapidly, and many new brands have entered it over the past three years.
Explain one way these market conditions are likely to affect Northbeck Oat Co.'s costs.
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Verity Travel sells overseas package holidays. UK household disposable income fell by around 2% between 2021 and 2023.
Explain how a fall in disposable income is likely to affect demand at Verity Travel.
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Ashdale Homes builds and sells new houses, funding its construction through variable-rate borrowing linked to the Bank of England base rate.
Analyse how rising interest rates are likely to affect Ashdale Homes.
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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.
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