IGCSEBusinessEdexcelExam Questions1. Business Activity & Influences on BusinessGovernment Objectives & Policies

Government Objectives & Policies (Edexcel IGCSE Business): Exam Questions

Exam code: 4BS1

1 hour20 questions
Easy
Medium
Hard
1
1 mark

Case Study

Rosso is a small restaurant in Rome, Italy. The owner, Luca, has noticed that the Italian government has recently increased the rate of VAT (a tax on goods and services). Luca is worried about the impact this will have on his business.

Which one of the following is the most likely impact on Rosso of an increase in VAT?

  • The cost of importing ingredients will fall

  • Customers may spend less on eating out

  • Rosso will have to employ fewer staff to comply with the law

  • The government will provide Rosso with a grant to cover the extra cost

Choose your answer

2
1 mark

Define the term legislation.

How did you do?

3
2 marks

Case Study

IKEA is a well-known home furniture retailer with stores throughout the world. It was started in 1943 by Ingvar Kamprad when he was given some money by his father for doing well at school. He wanted to produce furniture at a price that people could afford to buy. He realised that transporting furniture to customers was difficult, as goods were often damaged. He developed flat packs to avoid damage. A flat pack contained all the materials needed to self-assemble a table, a chair or a bed. All IKEA stores are run as franchises

IKEA aims to retain as many of its employees as possible.

Outline one reason why IKEA would read reports issued by governments.

How did you do?

4
1 mark

Case Study

Ferro is a steel manufacturer based in Warsaw, Poland. The government has recently invested heavily in improving the country's road and rail networks.

Which one of the following best describes how improved infrastructure could benefit a business like Ferro?

  • It reduces the amount of tax the business has to pay

  • It makes it easier and cheaper to transport goods to customers

  • It increases the minimum wage for employees

  • It reduces competition from overseas businesses

Choose your answer

5
1 mark

Case Study

NEXT is a well-known clothing retailer that operates in 70 countries and employs over 43,000 employees. Since NEXT commenced trading, it has introduced many other products to its range, such as home interiors, flowers and a wedding list service.

In 1999 NEXT launched its own online shopping platform, enabling customers to purchase its products wherever they live. It continues to improve its customer service by introducing new initiatives such as next-day delivery.

NEXT mainly uses its own factories for production. However, it does purchase some clothes, such as ladies' dresses, from Turkish factories.

State one reason why NEXT complies with health and safety laws.

How did you do?

6
1 mark

Case Study

Willow is a garden centre in Devon, England. Many of its customers buy plants and garden furniture using credit cards or loans. The Bank of England has recently announced an increase in interest rates.

Which one of the following is the most likely effect on Willow of an increase in interest rates?

  • The cost of Willow's raw materials will decrease

  • More customers will buy garden furniture on credit

  • Customers may reduce their spending on non-essential items

  • Willow will receive more government funding

Choose your answer

7
1 mark

Define the term interest rate.

How did you do?

8
1 mark

Case Study

Meera runs a small clothing shop in Manchester, UK. She has heard that the government plans to increase the national minimum wage. Meera is concerned about how this change will affect her business.

Which one of the following is the most likely impact on Meera's business of an increase in the national minimum wage?

  • Customer demand for clothing will increase

  • Employees will be required to work fewer hours

  • Meera's labour costs will rise

  • The government will reduce business taxes to compensate

Choose your answer

9
2 marks

Case Study

Greenfield Homes is a construction company that builds affordable housing in several regions across Ireland. It was founded in 2005 by Sarah Okonkwo, who wanted to provide quality homes at prices that first-time buyers could afford. The company employs over 500 workers and relies heavily on government contracts to build social housing. Greenfield Homes operates in areas where local councils have committed to increasing the supply of new homes. The company monitors government budgets closely to plan its future projects.

Greenfield Homes aims to expand into new regions over the next five years.

Outline one reason why a change in government spending would be important to Greenfield Homes.

How did you do?

10
1 mark

Case Study

SunTech Electronics is a large manufacturer of consumer electronics based in the United Kingdom. It exports products to over 50 countries worldwide. Recently, the UK government introduced a new trade agreement with several Asian countries, reducing import tariffs on electronic components. SunTech now imports many of its components from factories in South Korea and Vietnam at lower costs.

However, some governments in countries where SunTech sells its products have introduced trade barriers, such as quotas and tariffs, to protect their own domestic electronics industries.

State one reason why a government may introduce tariffs on imported goods.

How did you do?

1
6 marks

Case Study

TUI is a holiday business that has over 100 years of experience. It offers customers a variety of holidays, including staying in hotels and river and ocean-going cruises. There are many extras that it offers to holidaymakers, including car hire, extensions to the holiday and arranging day trips at all its holiday destinations.

The business is well known and flies its customers to over 180 destinations around the world, including Greece, Turkey and Spain. It has 1,600 travel agencies and 27 million customers. Holidays can be booked by visiting a travel agency or online. TUI has holidays to meet the needs of all its customers: families, children, couples and those with disabilities.

TUI wants to maintain its reputation by continuing to provide quality holidays and experiences that customers will enjoy. This will encourage them to return to book future holidays with TUI.

Analyse the effect on TUI customers of an increase in interest rates.

How did you do?

2
3 marks

Explain one reason why a business complies with health and safety legislation.

How did you do?

3
6 marks

Case Study

NEXT is a well-known clothing retailer that operates in 70 countries and employs over 43,000 employees. Since NEXT commenced trading it has introduced many other products to its range such as home interiors, flowers and a wedding list service.

In 1999 NEXT launched its own online shopping platform, enabling customers to purchase its products where ever they live. It continues to improve its customer service by introducing new initiatives such as next day delivery.

NEXT mainly uses its own factories for production. However, it does purchase some clothes such as ladies dresses from Turkish factories.

NEXT continually monitors progress so that it can measure the success of its business. It aims to do this through improving manufacturing techniques and cutting costs, whilst still maintaining the quality of the goods produced.

Analyse the effects for NEXT of an increase in UK interest rates.

How did you do?

4
6 marks

Case Study

Artify Studio was set up in 2015 by Tay Hui Jae in the busy Kampong Glam area of Singapore. Artify Studio’s aim is to have ‘a communal art space where people can come together and paint, where people would be given as much creative freedom as they would have if they were in their own spaces.’

Artify Studio provides many services including its popular Liberty Art Jam where customers can paint as well as listen to music. The studio offers a Corporate Art Jam and Regular Kids Classes. Customers can purchase art materials after attending the studio.

Artify Studio is a profit-making organisation with a social element. It employs seven part-time people, all of whom are art enthusiasts.

Analyse the effect of a decrease in interest rates on Artify Studio.

How did you do?

5
3 marks

Explain one impact of an increase in interest rates on a business

How did you do?

6
3 marks

Explain one reason why a government might invest in improving infrastructure

How did you do?

7
6 marks

Case Study

Oceano is a seafood processing factory based in Lagos, Nigeria. It employs 60 workers and exports frozen fish to countries across West Africa. The Nigerian government has recently announced plans to increase the national minimum wage by 25%. Oceano's owner, Adaeze, is concerned about the impact this will have on the business, as wages make up the largest share of the factory's costs.

Analyse the effects on Oceano of the government increasing the national minimum wage.

How did you do?

1
12 marks

Case Study

Soleil is a small vineyard in the south of France that produces wine and sells it to restaurants and shops across Europe. It employs 25 workers and has been run by the same family for three generations. The French government has recently announced two changes that will affect businesses: a significant increase in corporation tax, and a major investment programme to upgrade the country's motorway network.

Soleil currently transports its wine by road to customers in Germany, Spain and Italy. Delivery times are often delayed due to poor road conditions on some routes, and transport costs have risen by 15% over the past two years.

Evaluate the impact on Soleil of these government policy changes. You should use the information provided as well as your own knowledge of business.

How did you do?

2
9 marks

Case Study

Ember is a small pottery business based in Kyoto, Japan. The owner, Yuki, employs 12 workers who handcraft ceramic bowls and vases. Yuki sells most of her products to local gift shops and restaurants. The Japanese government has recently announced plans to increase interest rates. Yuki had been planning to take out a loan to buy a new kiln that would double the pottery's production capacity.

Yuki is considering two options:

  • Option 1: Go ahead with the loan and buy the new kiln despite the higher interest rates.

  • Option 2: Delay the purchase and use retained profit to save up for the kiln over the next two years.

Justify which one of these two options Ember should choose.

How did you do?

3
9 marks

Case Study

Terra is a fruit farm in rural Portugal that employs 40 seasonal workers to pick oranges and lemons. The owner, Miguel, exports most of his fruit to supermarkets in Germany and France. The Portuguese government has announced a 20% increase in the national minimum wage. At the same time, it has invested in upgrading the road network connecting rural areas to major ports.

Miguel is considering two options to manage the impact of these government policy changes:

  • Option 1: Reduce the number of seasonal workers and invest in automated picking machinery to lower labour costs.

  • Option 2: Keep all 40 workers and use the improved road network to expand into new export markets to increase revenue.

Justify which one of these two options Terra should choose.

How did you do?