Cheung runs a small retail shop in the city centre that sells fashion clothing for children. Because the market is highly competitive, Cheung understands that market research matters. Cheung is concerned that an increase in shop rent will raise his costs. Cheung said: ‘I will have to pay this higher rent as it is a good location. I need to increase revenue or reduce costs.’ Cheung sources all his supplies from a wholesaler in a nearby town. He is considering purchasing straight from a clothing manufacturer in another country.
(a)[2]
What does the term ‘market research’ mean?
(b)[2]
State what will happen to each of the following if Cheung’s shop rent goes up.
Variable cost:
Fixed cost:
(c)[4]
Identify and explain two possible reasons why Cheung believes the shop has a good location.
(d)[6]
Identify and explain two methods that Cheung could use to raise revenue.
(e)[6]
Do you think Cheung ought to change his supplier? Justify your response.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “Activity of finding out what consumers want or need before a product is produced” …