A Level Business: Marketing analysis (Cambridge 9609) – Revision Notes

These notes condense section 8.1 (Marketing analysis) of the Cambridge International AS & A Level Business 9609 syllabus for examination in 2026, 2027 and 2028. Full explanations and worked examples are in the study guide. When you are ready, try the practice questions, the wider topic 8 practice set, the course hub, the checklist or the free diagnostics. The content is A Level (topic 8), so it is assessed in the case-study papers, with AS content assumed.

8.1.1 Elasticity

Formulas (standard form; the syllabus does not print them)

Measure	Formula
Percentage change	(new − old) ÷ old × 100
PED	quantity response (%) ÷ price change (%)
YED	quantity response (%) ÷ income change (%)
PromED	quantity response (%) ÷ promotional spending change (%)

Reading the answer

Result	Meaning
PED size above 1	Elastic: quantity reacts more than proportionately to price
PED size below 1	Inelastic: quantity reacts less than proportionately to price
PED size equal to 1	Unitary: revenue does not change when price changes
YED above 0	Normal good; above 1, demand grows faster than income
YED below 0	Inferior good: demand falls when income rises
PromED above 0	Promotion lifts demand; size shows how strongly

Elasticity and revenue

Demand	Price rises	Price falls
Inelastic	Revenue goes up	Revenue goes down
Elastic	Revenue falls	Revenue rises

Quick check: PED of −1.5 and a 6% price rise gives a 9% fall in quantity. Revenue index = 1.06 × 0.91 = 0.9646, so revenue falls about 3.5%.

Worked reminder: a price cut from £10 to £9 is −10%. Quantity rises from 200 to 250, which is +25%. PED = +25 ÷ −10 = −2.5, so demand is elastic. Revenue rises from £2 000 to £2 250, as the table predicts.

Method in steps

1. Convert each change into a percentage of its starting value.
2. Divide the change in quantity by the change in the other variable.
3. Keep the sign.
4. Say elastic or inelastic (or normal or inferior), then say what it means for the decision.

Decisions and limitations

• Decisions: pricing (raise price if inelastic, cut if elastic), product range (premium versus budget lines as incomes change), promotion budgets (low PromED means a poor response per pound), revenue and profit planning.
• Limitations: based on past data; assumes other factors stay constant, but they rarely do; differs at different prices and sizes of change; depends on the quality of the data; short-run and long-run responses differ; rivals may react; it is a guide, not a guarantee.
• A judgement uses both: the figure supports a decision, the limitations qualify it, and cost (contribution) decides whether an action pays.

Judging an elasticity decision

• Ask what the figure says (size and sign), then what it means for revenue.
• Ask whether revenue is the right test. Profit depends on costs, so compare the change in contribution with any extra spending.
• Ask how reliable the estimate is: how old, how large a sample, what else changed.
• Reach a judgement that depends on the firm’s aim, such as growth, profit or brand image.

8.1.2 Product development

The process (typical sequence)

Stage	Purpose
Idea generation	Gather many possible ideas
Screening	Drop ideas that do not fit aims, skills or demand
Concept and business analysis	Estimate costs, price, demand and profit
Development	Build prototypes (R&D)
Testing	Customer trials or test marketing
Launch	Introduce with the marketing mix

The syllabus does not fix the number of stages, so use the order and explain each step.

Sources of ideas

Customers (surveys, reviews, complaints), employees (especially sales staff), competitors, suppliers and distributors, R&D staff, market research.

Research and development (R&D)

For	Against
New products and extended product life cycles	High cost
Possible protection, for example a patent	Uncertain results
Competitive advantage and lower unit costs	Long payback
Response to technology and rivals	Hard for a small firm to afford

Judging R&D: weigh the cost and delay against the chance of a product that customers value. A firm in a fast-changing market, or one that needs a unique product, has more to lose by not investing. A firm with spare cash and a long time horizon can accept a slow payback.

Must-know distinction: research looks for new knowledge or ideas; development turns them into a usable product. Both sit within R&D.

8.1.3 Sales forecasting

Why forecast

Production plans, stock levels, staffing, budgets and cash flow, marketing spending, and investment decisions all depend on expected sales. A forecast that is too high leaves unsold stock; too low loses customers.

Four period centred moving average (steps)

1. Add four consecutive quarters (the moving total). Slide on by one quarter each time.
2. Add pairs of consecutive moving totals.
3. Divide each pair total by 8. This is the centred moving average (CMA), the trend for the middle quarter.
4. Seasonal variation = actual − trend.
5. Average the seasonal variations for each quarter across the years.
6. Forecast = projected trend + average seasonal variation for that quarter.

Worked reminder with small numbers: totals of 210 and 218 give (210 + 218) ÷ 8 = 53.5. An actual of 47 gives a seasonal variation of 47 − 53.5 = −6.5, meaning sales were below trend. If the trend is expected to be 56, the forecast is 56 − 6.5 = 49.5.

Judging a moving average forecast: it suits a stable, seasonal pattern and gives a clear number. It cannot see a new rival, a change in fashion or a shock, so check it against recent market information. Reliability drops the more periods ahead the forecast looks.

Qualitative forecasting

Method	Idea
Expert opinion	Specialists give views, sometimes repeated until they converge
Sales force opinion	Staff share what customers say
Consumer panels, surveys and test marketing	Potential buyers state intentions
Market research	Trends and competitor activity

Use when there is no history (new product) or conditions have changed. Weakness: subjective and may be biased.

Quantitative versus qualitative

	Moving average	Qualitative
Based on	Past sales data	Opinion and judgement
Best when	Stable, seasonal pattern	New product or sudden change
Weakness	Assumes the past repeats; ignores new events	Subjective; opinions may be wrong

Impact on decisions

Production schedules, stock, seasonal hiring, finance for a peak, marketing timing, and whether to invest or cut costs. Flexibility reduces the cost of a wrong forecast. A forecast of rising sales may support new equipment, extra finance or a bigger marketing budget. A forecast of falling sales may lead to a cost review, a new product or a search for new markets. In a case study, link the forecast to the specific decision in the question and say how sure the firm can be of it.

Quick self-test

1. A firm raises a price by 6% and quantity demanded falls by 9%. Calculate PED.
2. Incomes rise 8% and demand for a product rises 4%. Calculate YED and classify the product.
3. Promotional spending rises 20% and sales rise 3%. Calculate PromED.
4. With PED of −2.0, a firm lowers its price by 5%. State the resulting percentage change in quantity demanded.
5. Two consecutive four-quarter totals are 210 and 218. Calculate the centred moving average.
6. The trend is 53.5 and actual sales are 47. Calculate the seasonal variation.
7. The projected trend is 56 and the average seasonal variation is −6.5. State the forecast.
8. YED is −0.4 and incomes rise 10%. What happens to demand?
9. Name two sources of new product ideas.
10. State one benefit and one drawback of R&D.
11. Give one reason a qualitative method suits a brand-new product.
12. Give two limitations of using elasticity to make a pricing decision.

Answers

1. 9 ÷ 6 gives −1.5: elastic.
2. 4 ÷ 8 = +0.5: a normal good, with demand rising more slowly than income.
3. 3 ÷ 20 = +0.15: promotion has a weak effect.
4. −2.0 × −5 = +10%.
5. 428 ÷ 8 = 53.5.
6. 47 − 53.5 = −6.5.
7. 56 − 6.5 = 49.5.
8. Demand falls by 4%: an inferior good.
9. Any two of: customers, employees, competitors, suppliers, R&D staff, market research.
10. Benefit: new products or competitive advantage. Drawback: high cost or uncertain results.
11. No sales history exists, so past figures cannot be used.
12. Any two of: past data may be out of date; other factors change at the same time; the figure may differ for a different size of price change; rivals may react.

Where marks are usually lost

• Using trend minus actual for seasonal variation.
• Dividing the sum of two four-quarter totals by 4 instead of 8.
• Giving an elasticity figure with no interpretation or no link to the decision.
• Dropping the negative sign, then calling an inferior good normal.
• Stating that elasticity “proves” the outcome, with no limitation.
• Listing R&D benefits only, with no cost, risk or payback time.
• Choosing a forecasting method with no reason tied to the case (new product, stable seasonal sales).
• Repeating the case facts without using them in the argument.

Frequently asked questions

What is the difference between price, income and promotional elasticity of demand? All three divide the percentage change in quantity demanded by a percentage change in something else: the product’s price for PED, consumer income for YED, and promotional spending for PromED. The Cambridge 9609 syllabus does not print the formulas, so these are standard forms.

How does price elasticity affect revenue? If demand is inelastic, a price rise increases revenue and a price cut reduces it. If demand is elastic, a price rise reduces revenue and a price cut increases it.

What does a negative income elasticity of demand mean? A negative YED means an inferior good: demand falls when incomes rise. A YED above 1 means a normal good whose demand grows faster than income.

When should a business use qualitative sales forecasting? When there is no sales history, such as for a brand-new product, or when conditions have changed sharply. Its weakness is that opinions are subjective and may be wrong.

Official syllabus

Cambridge International AS & A Level Business 9609 syllabus for examination in 2026, 2027 and 2028 (Cambridge University Press & Assessment), section 8.1 Marketing analysis.