Edexcel GCSE Business: Legislation, the economy and external influences (1BS0) – 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 follow the Pearson Edexcel Level 1/Level 2 GCSE (9-1) in Business (1BS0) specification, Issue 2, July 2022, Topic 1.5, items 1.5.3 to 1.5.5. All businesses and figures are invented. Formulae are not provided in the examinations (Appendix 3).

Links: the Business hub, the printable checklist, the study guide and the revision notes. Try the free diagnostics as well.

Questions

1. Define the term legislation. [2]

2. Give two areas of employment law named in the specification. [2]

3. Explain one way consumer law protects customers. [3]

4. Alder and Finch Toys has 14 employees and annual sales revenue of £180,000. Each year it spends £2,400 on safety testing, £1,350 on staff training and £900 on new product labels to meet legal requirements.

Calculate the total annual cost of meeting these requirements and work out what share of sales revenue it represents, correct to 1 decimal place. [4]

5. Rowan Fitness ignored repeated warnings about faulty gym machines. A member was injured and the inspector ordered the gym to close for 3 weeks. Weekly sales revenue is £4,600 and the injured member is claiming £9,500 in compensation.

Analyse two consequences for Rowan Fitness of not meeting its health and safety obligations. [6]

6. The table shows economic data for a country.

Year	Inflation rate (%)	Unemployment rate (%)
1	2.1	4.5
2	3.4	4.2
3	5.8	5.1
4	4.0	6.3

(a) Identify the year with the highest inflation rate. [1] (b) Calculate the change in the unemployment rate between year 2 and year 4. [1] (c) Explain one effect of inflation on a manufacturer’s costs. [3]

7. Thorne Joinery has a loan of £80,000. The interest rate rises from 5% to 7%. Before the rise, net profit was £36,000 on sales revenue of £400,000. Assume sales revenue and all other costs do not change.

(a) Calculate the extra annual interest. [2] (b) Calculate the net profit margin before and after the rise, to 1 decimal place. [3]

8. Explain one way a rise in unemployment could affect a business. [3]

9. Calder Garden Tools is a UK business. It buys bulbs from a Dutch supplier and invoices are in euros. It also sells spades abroad at a UK price of £36. At first £1 = 1.20 euros. Later the pound strengthens to £1 = 1.30 euros.

(a) Calculate the sterling cost of a 7,200 euro invoice at each rate. [3] (b) Calculate the euro price paid by a foreign buyer of one spade at each rate. [2] (c) Explain one way a stronger pound could affect a UK business that sells goods abroad. [3]

10. Burnside Bikes plans to spend £4,500 on a booking app because customers want to book repairs on their phones. Extra profit is forecast to be £9,900 in total over 3 years.

(a) Use the formula to calculate the average rate of return for the app. [3] (b) Explain one non-financial factor a business should consider before buying new technology. [3]

11. Vale Furniture sells sofas. Household incomes are falling and it now sells 900 sofas a month at £300 each. Variable cost is £180 per sofa and fixed costs are £70,000 a month.

Option A: cut the price to £270, with sales expected to rise to 1,080 sofas. Option B: keep the £300 sofa and add a budget sofa at £190 with a variable cost of £130, selling 450 a month. This adds £8,000 to fixed costs. Sales of the £300 sofa stay at 900.

Justify which option Vale should choose. [9]

12. Kellow Components is a small tap manufacturer with annual sales revenue of £600,000 and net profit of £48,000. This year stricter recruitment rules add £5,200 to costs; the interest rate on its £60,000 loan rises from 4% to 6%; and the pound weakens from £1 = 1.15 euros to £1 = 1.05 euros, affecting 46,000 euros of annual brass purchases from abroad.

Evaluate which of these three external influences is the most important for Kellow. [9]

Answers

1. Laws made by government [1] that businesses must follow [1]. [2] Examiner insight: A definition usually earns credit when it says who makes the rule and that it binds businesses. A bare example such as “health and safety” does not define the term.

2. Any two of recruitment [1], pay [1], discrimination, health and safety. [2] Examiner insight: “Give” tests recall, so a short answer from the specification list is enough.

3. Consumer law sets expectations for the quality of goods and services [1]. If a product is faulty, the customer has rights such as a repair, replacement or refund [1], so customers do not have to carry the loss and can trust the seller [1]. [3] Examiner insight: “Explain” answers usually gain credit for a statement followed by two expansions, each following from the one before.

4. Total = 2,400 + 1,350 + 900 [1] = £4,650 [1]. Percentage = 4,650 / 180,000 x 100 [1] = 2.6% (2.58 rounded) [1]. [4] Examiner insight: Show working on “calculate” questions and follow the rounding instruction. Giving 2.58% when 1 decimal place is asked may lose the final step.

5. Consequence 1: the gym must close for 3 weeks [1], so it loses 3 x 4,600 = £13,800 of sales revenue [1], which cuts its profit while its fixed costs continue [1]. Consequence 2: the member’s compensation claim of £9,500 [1] adds a large unplanned cost [1], and news of the injury could damage Rowan’s reputation so that members cancel and new ones do not join [1]. [6] Examiner insight: Credit tends to follow when each consequence draws on figures in the stem and then follows through to what happens to the business.

6. (a) Year 3 [1]. [1] (b) 6.3 - 4.2 = 2.1 percentage points (a rise) [1]. [1] (c) Inflation raises the prices of materials the manufacturer buys [1]. Its production costs rise [1], so it must absorb the rise and accept lower profit, or raise its own prices and risk losing customers [1]. [3] Examiner insight: “Identify” asks for a reading from the table, so one value is enough. For a change in a rate, give the unit (percentage points).

7. (a) Interest at 5% = 0.05 x 80,000 = £4,000 [1]. Interest at 7% = £5,600. Extra = £1,600 [1]. [2] (b) Before: 36,000 / 400,000 x 100 = 9.0% [1]. New profit = 36,000 - 1,600 = £34,400 [1]. After: 34,400 / 400,000 x 100 = 8.6% [1]. [3] Examiner insight: Net profit margin is in the specification’s formulae, so quoting it and substituting is a clear method. Find the new profit before the new margin.

8. More people are without jobs so total household income falls [1]. Customers have less to spend, so sales of the business fall [1], particularly if it sells non-essential items [1]. (Alternative: easier to recruit because there are more applicants, with less pressure to raise wages, if developed in the same way.) [3] Examiner insight: A common weakness is skipping the middle step about income. A developed chain is more convincing than a bare assertion.

9. (a) 7,200 / 1.20 = £6,000 [1]. 7,200 / 1.30 = £5,538.46 [1]. The stronger pound makes the invoice £461.54 cheaper [1]. [3] (b) 36 x 1.20 = 43.20 euros [1]. 36 x 1.30 = 46.80 euros [1]. [2] (c) Its goods cost foreign buyers more in their own currency (the spade rises from 43.20 to 46.80 euros, 8.3% more) [1], so the business may sell fewer abroad and become less competitive [1]. It follows through to profit [1]. [3] Examiner insight: Divide to change euros into pounds, multiply to change pounds into euros. A stronger pound should make foreign goods cheaper in pounds, which is a quick check.

10. (a) Average annual profit = 9,900 / 3 [1] = £3,300 [1]. Average rate of return = 3,300 / 4,500 x 100 = 73.3% [1]. [3] (b) Customer reaction: new technology may please customers who expect it [1], but if it is hard to use they may be put off [1], so the business should test it first (staff training or system reliability would also gain credit) [1]. [3] Examiner insight: Average rate of return divides average annual profit by the cost of the investment, not total profit. A non-financial factor goes beyond cost, to customers, staff or reliability.

11. Baseline: revenue 900 x 300 = £270,000 [1], variable costs 900 x 180 = £162,000, fixed £70,000, profit = £38,000. Option A: revenue 1,080 x 270 = £291,600; variable costs 1,080 x 180 = £194,400; profit = 291,600 - 194,400 - 70,000 = £27,200 [1]. This is £10,800 below the baseline. Option B: premium sofas give 270,000 - 162,000 = £108,000; budget sofas give 450 x 190 - 450 x 130 = £27,000; fixed costs are £78,000. Profit = 108,000 + 27,000 - 78,000 = £57,000 [1], which is £19,000 above baseline [1]. Judgement: Option B gives much higher profit [1], while Option A lowers profit because the price cut outweighs the volume gain [1]. Risk: if 150 customers switched from the £300 sofa to the budget sofa, premium sales would be 750 and profit £39,000 [1], still above Option A and just above baseline [1]. Justification: Option B is the better choice, provided the forecast of 450 budget sales is realistic [1]. [9] Examiner insight: “Justify” asks you to choose one of two options using the figures given. Comparing calculated profits and addressing a risk to the preferred option before concluding tends to strengthen an answer.

12. Cost of recruitment rules: £5,200 [1]. Extra interest: 2% x 60,000 = £1,200 [1]. Exchange rate: 46,000 / 1.15 = £40,000 and 46,000 / 1.05 = £43,809.52, so the extra cost is £3,809.52 [1]. Total extra cost = £10,209.52, which would reduce profit from £48,000 to about £37,790, a fall of 21.3% [1]. The exchange rate is the largest single cost, 37% of the total extra [1], though Kellow could look for UK suppliers [1]. Against it: the recruitment rules are permanent and repeat each year [1]. The interest increase is smallest, but the loan is a continuing commitment [1]. Judgement: the weaker pound is most important this year as it adds the largest cost, but legislation may matter more over time because it cannot be avoided and the exchange rate can move back [1]. [9] Examiner insight: “Evaluate” answers tend to earn more when they use the stem’s figures to compare the influences, consider a counter-argument and then give a supported conclusion.

Where marks are usually lost

• Treating “explain” like “list” and giving one point with no expansion.
• Not using the stem’s figures when the command word is “analyse” or “justify”.
• Wrong rounding, or leaving out the pound sign or units.
• Dividing instead of multiplying (or the reverse) in exchange-rate questions.
• Using the wrong base for a percentage.
• Writing a one-sided answer to “evaluate”, with no counter-argument or decision.

Next steps

• Read the revision notes and the study guide.
• Check coverage on the printable checklist and the Business hub.
• Take one of the free 10-minute diagnostics.
• Book a free trial class if you want help with extended answers.

Frequently asked questions

What do these legislation and economy practice questions cover? They cover Pearson Edexcel GCSE Business (1BS0) Theme 1 items 1.5.3 to 1.5.5: consumer and employment law, the economic climate, and how businesses respond to changes in technology, legislation and the economy.

How do you avoid mistakes in exchange-rate calculations? To turn a price in euros into pounds, divide by the number of euros per pound; to turn pounds into euros, multiply. Dividing instead of multiplying, or the reverse, is a common error.

What does an Explain question need? An Explain answer is a statement of fact with two expansion points. Giving one point with no development, as if the question said “list”, loses marks.

Do you need to name specific laws in Edexcel GCSE Business? The 1BS0 specification names no particular laws, so describe the principle of the legislation, such as quality, consumer rights, pay or health and safety, rather than naming a law you are unsure about.

Official syllabus

Pearson Edexcel Level 1/Level 2 GCSE (9-1) in Business (1BS0), Specification, Issue 2, July 2022, published by Pearson Education Limited. Theme 1: Investigating small business, Topic 1.5 Understanding external influences on business, items 1.5.3, 1.5.4 and 1.5.5.