Edexcel IGCSE Economics 1.1.2.c producers not maximising profit
Practise producer-choice questions by applying discounts, charity, customer care or survival aims to explain lower profit decisions.
- Syllabus
- First assessment 2019
- Course
- Economics 4EC1
Exam points
- Explain how sales-maximising managers may use discounts instead of maximising profit.
- Apply charitable work or customer care to justify pricing below cost in a firm context.
- Link survival or growth objectives to a producer accepting lower short-run profit.
1.1.2.c Why producers may not maximise profit question 1
[Maximum number: 6]
Jags owns a café in a small town in Malaysia. During a recent school holiday, she offered a free lunch to each child visiting the café with a paying adult. This was welcomed by customers who have had problems in the last few months due to the rising cost of living.
With reference to the data above and your knowledge of economics, analyse a possible reason why Jags chose not to maximise profit.
AO2 (3 marks)/AO3 (3 marks)
AO2 and AO3
- Factors influencing the growth of firms include the desire to spread risk, to take over competitors, access to finance, economies of scale and government regulation
- The martial arts club has been successful for a few years, meaning Anastasia may have access to finance
- Therefore, she may have enough finance with which to open a second club in another district of Budapest
- Although the club is successful in District 16, Anastasia may wish to spread the risk
- In case demand changes at her existing club the revenue from the second club is able to support the running of the firm
Level
Mark
Descriptor
0
No rewardable material.
Level 1
1-2
- Demonstrates basic knowledge and understanding by developing relevant points. Limited application of economic terms, concepts, theories and calculations (AO2).
- Information presented will lack selectivity and organisation. Interpretation of economic information will be limited, with a lack of analysis of issues (AO3).
Level 2
3-4
- Demonstrates partial knowledge and understanding by developing relevant points. Partial application of economic terms, concepts, theories and calculations (AO2).
- Information presented will demonstrate some selectivity and organisation. Interpretation of economic information will be good, with some analysis of issues (AO3).
Level 3
5-6
- Demonstrates clear knowledge and understanding by developing relevant points. Appropriate application of economic terms, concepts, theories and calculations (AO2).
- Information presented will demonstrate excellent selectivity and organisation. Interpretation of economic information will be excellent, with a thorough analysis of issues (AO3).
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