Edexcel IGCSE Business Studies 1.6.3 Effect of interest rates on
Practise applying interest rate changes to borrowing, repayments, consumer spending and business decisions in case studies.
- Syllabus
- First assessment 2019
- Course
- Business Studies 4BS1
Exam points
- calculate loan interest from a percentage rate and show the working clearly
- analyse how higher interest rates affect loan repayments, sales and cash flow
- evaluate a rate rise or fall using AO2 case evidence and short-term consequences
1.6.3 Effects of interest rates on businesses and consumers question 1
[Maximum number: 6]
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.
AO2 = 3 marks AO3 = 3 marks
AO2
- Lower interest rates could lead to an increase in the demand for the popular Liberty Art Jam sessions.
- The cost of borrowing comes down so Artify Studio could pay less on any loans they take out.
A03
- Artify Studio may need to put on additional sessions to cater for the increase in demand, this will lead to an increase in costs but as sales increase this can cover this cost.
- This will enable Artify Studio to have more funds available to increase advertising and bring in more customers.
(6)
Level
Mark
Descriptor
0
No Rewardable material.
Level 1
1-2
- Limited application of knowledge and understanding of business concepts and issues to the business context. (AO2)
- Attempts to deconstruct business information and/or issues, finding limited connections between points. (AO3)
Level 2
3-4
- Sound application of knowledge and understanding of business concepts and issues to the business context although there may be some inconsistencies. (AO2)
- Deconstructs business information and/or issues, finding interconnected points with chains of reasoning, although there may be some logical inconsistencies. (AO3)
Level 3
5-6
- Detailed application of knowledge and understanding of business concepts and issues to the business context throughout. (AO2)
- Deconstructs business information and/or issues, finding detailed interconnected points with logical chains of reasoning. (AO3)
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