Item A: Coast & Clay sells handmade homeware. During the last year, material costs rose by 11% because of inflation, while its typical customers' disposable income increased by only 3%. The business currently charges premium prices and earns a 14% profit margin. Competitors have introduced smaller, lower-priced products.
State one economic change affecting Coast & Clay.
Outline one impact of inflation on Coast & Clay.
Coast & Clay is considering two responses:
Option 1: Increase every selling price by 10%
Option 2: Keep current prices and introduce a smaller, lower-cost product range
Justify which one of these two responses Coast & Clay should choose.
37 exam-style questions on Edexcel GCSE Business 1.5 Understanding external influences on business, covering 1.5.1a Business stakeholders and their objectives, 1.5.1b How stakeholders and businesses affect each other, 1.5.1c Conflicts between stakeholder groups, 1.5.2a Types of technology used by business, 1.5.2b How technology influences business activity, 1.5.3a Principles of consumer law, 1.5.3b Principles of employment law, 1.5.3c The cost impact of legislation, 1.5.3d Consequences of meeting legal obligations, 1.5.4 The economy and business, and 1.5.5 External influences. Each one has a worked solution and a mark scheme showing where the marks go.