(a) (i) Define the term ‘opportunity cost’ (line 8). [2]
(ii) Briefly explain the term ‘market research’ (line 5). [3]
(b) (i) Refer to Table 1. Calculate the price elasticity of demand for Candle A when the price is reduced from $5 to $4. [3]
(ii) Explain one benefit to SC from using price elasticity of demand when making pricing decisions. [3]
(c) Analyse why SC’s objectives might change over time. [8]
My answer:
Business objectives are goals a business aims to achieve. They must be specific, measurable, achieveable and time specific. SC’s original objective was to ensure the survival of her busines sin the first year of trading in which she has achieved.
One reason SC’s objectives may change over time is to keep up with several competitors. Because SC is a sole trader she may have unlimited liability which means that she may need to raise additional capital in order to ensure continuity for the business. By finding the right product and working on her pricing strategy she may be able to raise enough capital for expansion which leads to more profit that may be added back intro the business.
Modified CR response answer:
Key-
Objectives are goals set by the business. SC’s objectives may change overtime because at the moment Sc has only been trading for one year and is a sole trader business. Therefore, her first objective was survival, which she has achieved. As a result, she now needs to create a new objective.
One reason Sc’s objectives may change overtime is to keep up with several other competitors in the area. Jane will need to do this because she is a new sole trader business with limited liability, meaning she could lose all ther personal possesions if she fails. She will need to keep up with her competitors by changing her product prices (PED) or promoting her business. This will lead to increased sales, which could give her a larger market share. As a result, she will be ahead of her competion and her business is more likely to survive.
Another reason why SC’s objectives may change is if she developes a website for e-commerce. If so, her objectives may be to create a successful, attractive and useful website. This will be good for Jane as more customer will be able to access her website, leading to a larger customer base which could increase sales and could lead to an increase in profit and income for jane.
