CAIE IGCSE Business Studies 1.1 Business Activity Questions

Award up to 2 marks for identification of relevant points. Award up to 2 marks for relevant development of points. Award up to 2 marks for a justified decision as to which is the best way for a business to increase added value.

Points might include:

Ways to increase price:

- (Improve) quality of product/service [k] so customers may be prepared to pay higher prices [an]

- (Build a) brand image/marketing/packaging [k] so customers think the product is worth more [an]

- (Improve) product features / change/create a unique design [k] making the product more desirable than similar products so willing to pay more [an]

- Convenience [k] customers may pay more for a product they can have straightaway [an]

Ways to lower (input/raw material) costs:

- Buy cheaper raw materials / find cheaper suppliers [k] reduces material/input costs [an] widening the gap between cost and price [an]

- Reduce the number of materials used [k]

Other appropriate responses should also be credited.

Justification might include:

One way is improving the quality [k] as customers may be willing to pay a higher price [an]. It could buy cheaper raw materials [k] which may reduce material costs [an]. Improving quality is better because cheaper materials could damage the reputation leading to fewer sales [eval] while improving quality could even help attract new customers [eval].

This is a general question so there are no marks for application.

To access [eval], must discuss two valid ways. The second [eval] mark must be awarded for a comparison between two valid ways.

Some points could be [k] or [an] but do not award the same point twice.

Some analysis can be used for more than one point, but only award once.

Analysis can be awarded for explaining:

- The reason why price /cost may be higher/lower

- How way increases added value

Award up to 2 marks for identification of relevant points. Award up to 2 marks for relevant development of points. Award up to 2 marks for a justified decision as to which is the best way for a business to increase added value.

Points might include:

- Use cheaper materials/supplier [k] will help lower (input) costs [an]

- Increase price [k] as this would widen the gap between (input) cost and price [an]

- Improve the packaging [k] so customers perceive the product to be worth more [an] so may be prepared to pay extra [an]

- Excellent customer service [k] so customers may be prepared to pay a higher price [an]

- Branding/improve brand image/marketing [k]

- Additional product features [k]

- Convenience [k]

Other appropriate responses should also be credited.

Justification might include:

One way is to use cheaper materials [k] as this will help lower input costs [an]. The business could increase the price [k] as this would widen the gap between input cost and price [an]. Setting a higher price is better because customers may still be willing to pay more to maintain good quality [eval] whereas using cheaper materials is more likely to lower quality and lower sales [eval].

This is a general question so there are no marks for application.

Some points of analysis could apply to more than one way but only award once.

Award 2 marks for a full definition. Award 1 mark for a partial definition.

The difference between the selling price of a product and the cost of bought-in materials and components. [2]

Partial definition e.g. improvement to the product/that makes it worth more [1]

For two marks needs reference to the difference
between both cost and selling price/what the
product is sold for.