Marketing Paper 1

Question 1

price inelastic

less proportionate change
demand doesnt affect price

Answer 1

• customers are loyal to the brand
• if price rises the demand will stay the same
• business can charge higher prices
• generate more revenue
• increase profit margins
• can be used in research and development to generate more revenue

Question 2

price elastic

demand change affects price
proportionate change

Answer 2

• customers eont be loyal to the brand
• if price increases demand will fall
• pressure to keep low prices
• lower revenue
• reduce profit margin

Question 3

reasons for price elasticity

Answer 3

• poor customer service
• lots of substitutes
• poor quality
• bad publicity
• lach of USP

Question 4

ways to improve price elasticity

Answer 4

• improve productivity
• more output
• fixed costs spread out = lower unit costs
• lower selling price
• increase demand = increases revenue

Question 5

purchasing economies of scale

saving costs by increasing production

Answer 5

• sales increase
• increase volumes ordered from suppliers
• potential discount from bulk buying
• lower selling price
• increase demand (especially in a price elastic market)

Question 6

Market economies

production and prices are determined by competition

Answer 6

• business increase sales
• increase volumes sold
• fixed costs of marketing can be spread over more units
• lower unit for fixed costs