Theme 1

Question 1

A + D- Mass markets

Answer 1

A= Purchase goods and materials in bulk
Easier to afford large advertising and marketing.
D= Large competition
Need a strong USP

Question 2

A + D- Niche Markets

Answer 2

A= Less competition
Products tailored to meet customer needs.
D= Fewer potential customers
May be difficult to persuade retailers to stock the product.

Question 3

Factors affecting demand

Answer 3

• Change in consumer incomes
• Fashion, tastes and preferences
• Advertising and branding
• External shocks

Question 4

Price Elasticity Demand Calculation

Answer 4

percentage change in quantity demand/percentage change in price

Question 5

Factors influencing PED

Answer 5

• Number of close substitutes
• Cost of switching between products
• Whether the product is luxury or essential
• The product is one that customers consume out of habit

Question 6

Cost-Plus Pricing

Answer 6

Adds together costs of raw materials, labour and overhead costs. Gives a cost per unit.
A= Easy to calculate.
D= Ignore price elasticity.

Question 7

Price Skimming

Answer 7

Sets a high price initially and gradually lowers over time.
A= Maximise revenue.
D= Strategy could break down as competitors enter the market.

Question 8

Penetration Pricing

Answer 8

Tries to increase market share by offering a low initial price.
A= Gain market share quickly
D= Loss at first

Question 9

Predatory Pricing

Answer 9

Set such low prices that other firms cannot compete and are forced to leave the market.
A= No competitors
D= Illegal under competition law