CAIE IGCSE Business Studies 6.1.1 Business cycle
Practise linking growth, boom, recession and slump to business demand, costs, employment, inflation and case-study decisions.
- Syllabus
- 2027–2029
- Course
- Business 0264
Exam points
- explain how recession, slump or growth changes sales, costs or staffing in a named business
- use case evidence to judge which business-cycle effect has the largest impact on profit or sales
6.1.1—Business cycle question 1
[Maximum number: 6]
Avtar owns a car repair business which operates in the private sector. It is a small business with 2 full-time employees. Avtar wants to find out the best way for a business to increase added value. Avtar's business needs finance for many reasons. Avtar wants to know how an economic recession might affect his business.
Explain two ways an economic recession might affect Avtar's business.
Way 1:
Explanation:
Way 2:
Explanation:
Award 1 mark for identification of each relevant way (max 2). Award 1 mark for each relevant reference to this business (max 2).
Award 1 mark for each relevant explanation (max 2).
Points might include:
- Less/lower demand/sales [k] for car repairs [app] reducing revenue / need to make redundancies [an]
- Less/lower competition (as other businesses fail) [k] which could increase potential customer base [an]
- Widen pool of potential employees [k] if he wants more than 2 employees [app] which may lower recruitment costs [an]
- Reduce number of employees [k] so lower break-even / cash outflows / lower costs [an] so does not need finance [app]
- May lower prices [k] which reduces added value [app] increase demand [an]
- Material costs may be lower [k] which may increase profit margin/lower variable costs [an]
- May delay any expansion plans [k] as not able to afford it [an] so business must remain small [app]
- Hard to survive / may close down / objective may switch to survival [k] so may lose his investment/difficult to attract investment [an]
- May have cash flow problems [k] so need overdraft/loan/cannot repay loans/day-to-day costs [an]
- Customers may delay payment / more bad debts [k]
- More difficult to raise finance/banks may not lend [k]
Other appropriate responses should also be credited.
To use words from the stem as application, the reference must be appropriate (i.e. make sense) in relation to the point being made.
The following words are likely to be appropriate for this question:
- (Car) repair / garage or examples
- 2 workers
- Full-time (employees)
- Private sector business
- Small business
- Added value
- Short-term/long-term finance/needs finance (for many reasons)
Other appropriate examples can be credited.
Some points such as lower costs can be [k] or [an] but only award once.
Points about repay loans/interest/need to borrow from bank is [an] only.
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