Theme 4.2

Question 1

Define a push factor and give 2 examples.

Answer 1

Something that happens within an existing market that forces a business to look elsewhere for survival or success.

E.g. saturated markets
Competition ( domestic market or imports)

Question 2

Define a pull factor and give 2 examples.

Answer 2

Something that happens in another market that attracts a business towards it, to take advantage of the conditions.

E.g. Economies of scale
Risk spreading

Question 3

Define market saturation.

Answer 3

Occurs when it becomes impossible to expand sales further in that particular market.

If the product is a durable good e.g. a washing machine, it may still be possible to sell replacement machines.

Question 4

What’s a competitive advantage for foreign suppliers ?

Answer 4

Low labour costs (e.g. in clothes manufacturing)

Question 5

Define economies of scale.

Answer 5

Reduction in average cost per unit brought about by increasing the scale of production ( as output increases).

Question 6

What are the conditions that prompt trade ?

Answer 6

• Push factors
• Pull factors
• Possibility of off-shoring and outsourcing
• extending product life cycle by selling in multiple markets

Question 7

What’s the advantage of risk spreading and diversifying markets ?

Answer 7

If sales fall in one market, they may still rise or remain stable in another.

E.g. a downturn in one country can be compensated for by growth in another.

Question 8

Define outsourcing.

Answer 8

The delegation of one or more business