3.2.2 assessing the potential of different economies

Question 1

What are the factors influencing expansion into a market? [2]

Answer 1

• Ease of doing business
• Exchange rate

Question 2

What is the ease of doing business influenced by? [5]

Answer 2

• Government policy
• Corruption
• Political stability
• Conflicts
• Stability of the economy

Question 3

Why does ease of doing business influence expansion into a market?

Answer 3

The easier it is to do business, the more likely it is that a firm will expand into the market.

Government policy could make doing business difficult + restricted.

Question 4

What are factors influencing the location of production sites? [4]

Answer 4

• Costs of production
• Government incentives
• Natural resources
• Likely return on investment

Question 5

Where has production started to move more recently since an increase in average incomes in China?

Answer 5

Countries such as Mexico have become more attractive, as even though labour costs are slightly higher, transport costs to America are lower so goods can be produced more cheaply.

Question 6

How do government incentives influence location of production sites?

Answer 6

They could incentivise production by providing subsidies to firms to produce in a particular country, since production costs are lower.