PED and Pricing Decisions | Edexcel Business AS

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Extract B Kirklees Active Leisure (KAL) K A L is a UK-based charity focusing on the provision of leisure services. It was established by Kirklees Council in 2002. KAL operates 12 leisure centres, all of which include several health and fitness facilities. Some have tennis courts, some have football pitches and six have swimming pools. Off-peak membership costs £19.95 per month to use the facilities at less busy times and £29.95 per month at peak times, when demand is highest. It includes access to all health and leisure facilities, fitness classes and swimming pools. KAL has a high number of members so many of its peak time classes are full each week, leading to complaints from members. Following the global health crisis and changes in economic variables, such as increased energy costs, KAL has been under considerable financial pressure. At the end of 2022, it was decided that KAL's costs could only be reduced significantly by temporary reductions in the number of facilities operated. Two of the swimming pools and two of the leisure centres were closed completely during the winter of 2022/23. However, one of the pools closed was used by a number of local schools and re-opened in early 2023. Members were consulted on ideas to decrease costs and/or increase revenue. These included raising the monthly membership fee, reducing opening times of facilities, increasing the number of volunteers instead of paid employees and reducing the temperature of the swimming pools.

Extract C Selected information from KAL's statement of comprehensive income for the year ended 31 March 2022

Table for Question Edexcel A-Level Business AS 1.3.2 4d Ped and Pricing Questions question 1 — Edexcel A-Level Business AS

Assess the likely impact on demand for off-peak K A L membership if the price is increased from £19.95 per month.

Indicative content guidance
Answers must be credited by using the level descriptors (below) in line with the general marking guidance. The indicative content below exemplifies some of the points that candidates may make but this does not imply that any of these must be included. Other relevant points must also be credited.
Knowledge, Application, Analysis, Evaluation - indicative content
- Demand is the willingness and ability of consumers to buy a product at a given time and at a given price
- The law of demand for a normal good dictates that when price increases, quantity demanded will fall
- This is because fewer people are likely to be willing to purchase the
membership as they believe it is not worth the higher price and/or fewer people are likely to be able to afford the higher price
- Therefore, if KAL increased the off-peak membership price from £19.95,
demand is likely to fall
- This may mean KAL would have fewer off-peak members using its facilities which may lead to a fall in revenue and therefore profit
- However, it would depend on how much the price increased as demand
may not fall by much if many people were still willing and able to purchase the membership at the higher price
- It would depend on the price elasticity of demand how much demand would fall as there may be few competitors offering a similar service at a lower
price
- It may depend on the income of members, as some people may have enough disposable income for an increase not to have too much of an effect and/or they may believe health and fitness are worth the extra
expense
- External influences, such as the rate of inflation or interest, may affect
demand. For example, if members have a lower disposable income due to
increases in either rate
- If the membership fee has not increased for some time, members may feel it is worth paying the higher price
- As customers have experienced the closure of some facilities they may prefer to pay a higher fee than lose access to other leisure
centres/swimming pools

Level	Mark	Descriptor
	0	No rewardable material.
Level 1	1-2	Isolated elements of knowledge and understanding - recall based. Weak or no relevant application to business examples. Generic assertions may be presented.
Level 2	3-4	Elements of knowledge and understanding, which are applied to the business example. Chains of reasoning are presented but may be assertions or incomplete. A generic or superficial assessment is presented.
Level 3	5-7	Accurate and thorough knowledge and understanding, supported throughout by relevant and effective use of the business behaviour/context. Analytical perspectives are presented, with developed chains of reasoning, showing cause(s) and/or effect(s). An attempt at an assessment is presented, using quantitative and/or qualitative information, though unlikely to show the significance of competing arguments.
Level 4	8-10	Accurate and thorough knowledge and understanding, supported throughout by relevant and effective use of the business behaviour/context. A coherent and logical chain of reasoning, showing cause(s) and/or effect(s). Assessment is balanced, wide ranging and well contextualised, using quantitative and/or qualitative information, and shows an awareness of competing arguments/factors, leading to a supported judgement.

Edexcel A-Level Business AS 1.3.2 4d Ped and Pricing Questions question 1