Harbour Loaf is one of only two bakeries in a small coastal town. Over a year, the prices of the flour, butter and energy it uses rise sharply.
Why is Harbour Loaf's profit margin likely to be squeezed less than that of a city-centre bakery facing many competitors?
It can raise its prices to cover the higher costs without losing many customers
It can buy its ingredients more cheaply because few bakeries compete to buy them
Rising prices across the economy lift its sales, so extra revenue covers its costs
It can keep its prices unchanged and win extra customers from its one rival
62 exam-style questions on OCR GCSE Economics 3.4 Price stability, covering 3.4.1 Price stability and inflation, 3.4.2 Measuring inflation with CPI, 3.4.3 Calculate the effect of inflation, 3.4.4 Analyse inflation figures, and 3.4.5 Causes and consequences of inflation. Each one has a worked solution and a mark scheme showing where the marks go.