AQA GCSE Business: Competitive environment (8132) – Practice Questions

These are original questions written for Marlbridge, for revision and practice on this content. They are not reproduced past-paper questions, and they do not replicate the exam’s exact structure, question count or mark tariffs – examination boards hold copyright in their own papers. Use these alongside the official past papers from your board or school.

These questions cover AQA GCSE Business (8132) section 3.2.6 Competitive environment, from 3.2 Influences on business, which is assessed on both papers. The specification gives no tier labels for this section. Questions 1 to 4 are short-answer style; questions 5 to 10 are based on case studies and use the command words explain, analyse and evaluate.

Related: Competitive environment revision notes and competitive environment study guide. Course hub: AQA GCSE Business | printable checklist

How should you use these questions?

Answer under timed conditions (about a minute per mark). In longer answers, use the case study details and develop each point with a consequence for the business.

Questions

1. Which one of the following best describes a market? [1]

A. A building where goods are made B. Anywhere buyers and sellers come together to exchange goods or services C. A group of businesses owned by the same person D. The total profit of all firms selling one product

2. Define the term competition. [1]

3. Identify two situations in which a business may face little or no competition. [2]

4. State two reasons why an entrepreneur may start a business despite the risk. [2]

Case study: Riverbank Cycles

Riverbank Cycles is a sole trader in a market town, run by Priya, who left her job as an engineer to start it four years ago. It sells and repairs bicycles. Until last year it was the only cycle shop within 20 miles. A national chain has now opened a large store on the edge of town, with lower prices and a wider range. Riverbank sold 40 bikes a month at an average price of £450; since the chain opened, monthly sales have fallen to 32 bikes. Repairs, which the chain does not offer, are still steady at 120 a month at £35 each.

5. Calculate the percentage fall in Riverbank’s monthly bike sales. [2]

6. Calculate Riverbank’s total monthly revenue from bikes and repairs after the chain opened. [2]

7. Explain one benefit to Riverbank of having been the only cycle shop within 20 miles. [2]

8. Analyse two ways the arrival of the national chain could affect Riverbank Cycles. [6]

9. Explain one reason why Riverbank faces uncertainty even if it responds well to the chain. [2]

10. Priya is considering two responses: (A) cut bike prices by 10% to compete, or (B) keep prices and promote the repair service and expert advice. Evaluate which option Priya should choose. [9]

11. Explain how market research could reduce the risk of a new business failing. [2]

12. Explain why limited liability reduces the risk for the owners of a business. [2]

Answers

1. B [1].

2. Rivalry between businesses selling similar goods or services to the same customers [1].

3. Any two [1 each]: the only supplier in an area; a new or unique (for example patented) product; very high start-up costs in the market; a small specialist market.

4. Any two [1 each]: to be their own boss; flexible working hours; to pursue an interest; to earn more money; to fill a gap in the market; dissatisfaction with their current job.

5. Fall = 40 - 32 = 8 [1]; 8 / 40 x 100 = 20% [1].

6. Bikes: 32 x £450 = £14,400 [1]. Repairs: 120 x £35 = £4,200. Total = £18,600 [1].

7. Riverbank could charge prices without being undercut [1], so it could earn a higher profit per bike / build a loyal customer base [1].

8. Up to 3 marks per developed way. Indicative content:

• Lower sales: customers may switch to the chain’s lower prices [1], as shown by the fall from 40 to 32 bikes [1], reducing revenue by £3,600 a month (8 x £450), which could squeeze profit [1].
• Pressure to cut prices: Riverbank may lower prices to compete [1], but a small sole trader probably has higher costs than a national chain [1], so profit per bike would fall [1].
• Pressure to improve: Riverbank may focus on what the chain does not offer, such as repairs [1], which are steady at 120 a month [1], so it could keep customers by offering expert service [1].
• Functional areas: Priya may need to spend more on marketing [1], adding costs [1] at a time when revenue is lower [1].

9. Any one developed point [2]: customer tastes could change (for example to electric bikes) so demand for its range could fall; the economic climate could worsen, so people spend less on leisure; the chain could start offering repairs; costs from suppliers could rise.

10. Level of response, 9 marks. Indicative content:

For option A: Lower prices may win back some customers [1]. Using the case: a 10% cut makes the average price £405 [1]. If sales returned to 40 bikes, bike revenue would be 40 x £405 = £16,200, more than the current £14,400 [1].

Against option A: A national chain can probably buy in bulk and keep cutting prices, so a price war could hurt Riverbank more [1]. If sales stayed at 32, bike revenue would fall to 32 x £405 = £12,960 [1].

For option B: Repairs are a service the chain does not offer, and bring £4,200 a month [1]. Expert advice from an engineer is a point of difference, which helps build loyalty without cutting margins [1].

Against option B: Promotion costs money, and some price-sensitive customers will still buy from the chain [1].

Judgement: Option B is likely to be better because Riverbank cannot match a national chain on cost, and its repairs and expertise are a strength the chain lacks; however, it depends on how many customers value advice over a lower price [1].

Levels: 7-9 marks: balanced, uses case figures, clear justified judgement. 4-6 marks: some analysis of both options with a limited judgement. 1-3 marks: simple points, little use of the case.

11. Research shows whether there is demand and what rivals offer [1], so the business can change or drop the idea before spending large sums of money [1].

12. The owners can only lose the money they invested in the business [1], so their personal assets, such as a house, are protected if it fails [1].

Where marks are usually lost

• Using the new figure as the base in a percentage change (32 instead of 40).
• Forgetting to include repair revenue when asked for total revenue.
• Writing generic points without using the case study.
• In the evaluation, choosing an option without weighing the other one.
• Claiming that a response “removes” the risk.

Frequently asked questions

How long should a 9-mark answer be? Long enough to analyse both options with case evidence and reach a justified judgement, usually around a page.

Do I need to know real competition law? No. Section 3.2.6 is about the impact of competition and risk on businesses, not competition law.

What earns the judgement mark? A clear decision with a reason taken from the case, often saying what the decision depends on.

Official syllabus

AQA GCSE Business (8132) specification, Version 1.0, for first teaching from September 2017, published by AQA: section 3.2.6 Competitive environment.