VVA is a business located in country X. It makes school backpacks (bags). VVA distributes its products through retailers. The Managing Director understands that demand can be influenced by several factors, including the stage of the business cycle and how competitive the market is. VVA brings in 45% of its raw materials from overseas. The Managing Director is concerned that import tariffs and import quotas, together with an appreciation in country X’s exchange rate, may have an effect on VVA.
(a)[2]
Define the term ‘import tariff’.
(b)[2]
State two reasons why some markets can become more competitive.
(c)[4]
State the four stages in the business cycle.
(d)[6]
Explain one possible effect of the following changes on VVA when it is importing raw materials:
The introduction of import quotas in country X.
An appreciation of country X’s exchange rate.
(e)[6]
Do you think retailers are the most suitable channel of distribution for a manufacturing business to use? Justify your answer.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “A tax levied on imported goods as they enter a country” …