Edexcel GCSE Business: Product and price decisions (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.

This set follows Pearson Edexcel Level 1/Level 2 GCSE (9-1) Business (1BS0), Issue 2, July 2022, Theme 2: Building a business, topic 2.2 Making marketing decisions, content items 2.2.1 Product and 2.2.2 Price. Calculators may be used and workings should be shown. The formulae are not provided in the examinations, so learn them. All businesses and figures are invented.

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

Questions

1. Define the term “differentiation”. [2]

2. Belmarsh Skincare sells a face serum. Its sales in units were: Year 1: 300; Year 2: 1,100; Year 3: 2,900; Year 4: 3,000; Year 5: 2,950; Year 6: 2,100.

(a) Calculate the percentage change in sales from Year 1 to Year 2. Give your answer to one decimal place. [2] (b) Calculate the percentage change in sales from Year 5 to Year 6. Give your answer to one decimal place. [2] (c) Identify the phase of the product life cycle the serum had entered by Year 6. [1]

3. Give the three parts of the design mix named in the specification. [3]

4. Explain one benefit to a business of differentiating its product. [3]

5. Pickwith Foods makes a pasta sauce with a unit cost of £14.50 for a case of twelve jars. It uses cost-plus pricing with a 30% mark-up. Calculate the selling price of one case. [3]

6. Hobrook Biscuits sells a ginger biscuit whose sales have fallen for three years. Outline one extension strategy the business could use. [2]

7. Sutcombe Gadgets has designed a pocket projector. The variable cost is £48 a unit and fixed costs are £9,000 a month. The directors are choosing between two plans.

Plan A: price skimming. Launch price £130, expected sales 300 units a month. Plan B: penetration pricing. Launch price £95, expected sales 520 units a month.

(a) Calculate the monthly profit under each plan. [4] (b) Justify which plan Sutcombe Gadgets should choose. [6]

8. Explain one way in which technology can influence a business’s pricing strategy. [3]

9. Caldmore Café sells a mid-morning drink to two market segments. On a typical weekday, 60 commuters pay £3.80 each and 90 retired customers pay £2.60 each.

(a) Calculate the total revenue from the two segments. [2] (b) Analyse how the existence of these two segments could influence Caldmore Café’s pricing. [4]

10. Moorvale Drones is launching a new model into a market with several well-known rivals. The model has features no rival offers. Analyse how the phases of the product life cycle could affect the pricing strategy Moorvale Drones uses. [6]

11. Marrow & Finch sells a chocolate bar at £1.50 with a variable cost of £0.90 a bar. Annual sales are falling and are expected to reach 40,000 bars next year. The owners are considering an extension strategy: a new flavour and wrapper, costing £9,000, expected to hold sales at 62,000 bars.

(a) Calculate the expected net gain from the extension strategy. [3] (b) Evaluate whether Marrow & Finch should go ahead with the extension strategy. [9]

Answers

1. Making a product or service different from those of rivals [1] in a way that customers notice and value [1]. [2] Examiner insight: A definition is likely to read more convincingly if it says customers must value the difference, since “being different” alone does not explain why it helps.

2. (a) Percentage change = change ÷ original × 100 [1]. (1,100 − 300) ÷ 300 × 100 = +266.7% [1]. [2] (b) (2,100 − 2,950) ÷ 2,950 × 100 [1] = −28.8% [1]. [2] (c) Decline [1]. [1] Examiner insight: Dividing by the original figure, not the new one, is the usual route to the correct percentage; showing the subtraction first makes the method clear even if the final rounding slips.

3. Function [1]; aesthetics [1]; cost [1]. [3] Examiner insight: Three words are enough here, so there is nothing to gain from explaining them; check each is one of the three named parts and not a general design idea such as quality.

4. One benefit is that differentiation can support a higher price [1]. This is because customers who value the difference are willing to pay more than for a similar rival product [1]. As a result, the business earns more revenue per unit sold and may raise its profit [1]. [3] Examiner insight: A chain of a benefit followed by two linked expansion points is the usual shape for an “explain” question; naming a second, separate benefit is less likely to help than developing the first.

5. Mark-up = unit cost × mark-up percentage = 14.50 × 0.30 [1] = £4.35 [1]. Selling price = 14.50 + 4.35 = £18.85 [1]. [3] Examiner insight: Adding only the mark-up to give £4.35 is a common slip; the final step of adding it to the unit cost is worth showing clearly, with the pound sign.

6. One extension strategy is to launch a new flavour, such as a spiced ginger and orange biscuit [1]. This could attract new customers or renew interest among existing ones, so sales stop falling [1]. [2] Examiner insight: An “outline” answer is likely to do better when the strategy is tied to the biscuit and its falling sales, not given as a general list of methods.

7. (a) Plan A: revenue 130 × 300 = £39,000; variable costs 48 × 300 = £14,400; total cost 9,000 + 14,400 = £23,400 [1]. Profit = 39,000 − 23,400 = £15,600 [1]. Plan B: revenue 95 × 520 = £49,400; variable costs 48 × 520 = £24,960; total cost 9,000 + 24,960 = £33,960 [1]. Profit = 49,400 − 33,960 = £15,440 [1]. [4] (b) The profits are almost the same: Plan A is £160 a month higher [1]. Plan B earns higher revenue (£49,400 against £39,000) and wins more customers, which could build brand awareness and market share [1]. A penetration price may also deter rivals from entering [1]. However, Plan B needs 520 sales a month, which is more uncertain for a new product, whereas Plan A needs only 300 [1]. Plan A leaves room to cut the price later, when rivals arrive, while a low launch price is hard to raise [1]. Judgement: choose Plan A, because it earns the same profit from fewer sales, which carries less risk and keeps the option to lower the price later [1]. A reasoned choice of Plan B, based on market share, could also be supported. [6] Examiner insight: A “justify” answer is likely to gain more from recommending one plan and giving a reason than from describing both plans equally; the figures from part (a) are better used as evidence than repeated.

8. Technology lets customers compare prices across many sellers in seconds [1]. This puts pressure on a business to keep prices close to rivals’, or lose sales to a cheaper seller [1]. As a result, it may adopt competitive pricing and have less room to charge a premium [1]. [3] Examiner insight: Naming the technology (such as price-comparison websites or apps) and then following it through to a pricing consequence is the likely route to the full range of credit.

9. (a) Commuters: 60 × 3.80 = £228 [1]. Retired customers: 90 × 2.60 = £234, so total = 228 + 234 = £462 [1]. [2] (b) The segments appear willing to pay different prices, since commuters pay £3.80 and retired customers £2.60 [1]. Charging each group a different price (for example a discount for retired customers) lets the café keep both [1]. A single price of £3.80 might lose retired customers, who are the larger group at 90 customers [1]. A single price of £2.60 would give up income from commuters who would pay more [1]. [4] Examiner insight: Analysis answers are likely to score better when they use the two prices and group sizes from the case, not a general statement that segments are different.

10. In introduction, the new model has features no rival offers, so Moorvale Drones could use price skimming [1]. Early buyers who want the newest features may accept a high price, giving high profit per unit [1]. In growth, rivals are likely to copy the features, so the business may have to lower its price or move to competitive pricing [1]. In maturity, many rivals sell similar drones, so competitive pricing keeps sales without a large premium [1]. In decline, promotional pricing could clear unsold stock [1]. The strategy has to change as competition grows, because a high price that suited introduction would lose customers later [1]. [6] Examiner insight: Moving through the phases in order, with a different pricing consequence for each, is likely to read as analysis; repeating the same “price will change” comment for every phase is less likely to earn credit.

11. (a) Contribution per bar = 1.50 − 0.90 = £0.60 [1]. Extra bars = 62,000 − 40,000 = 22,000, so extra contribution = 22,000 × 0.60 = £13,200 [1]. Net gain = 13,200 − 9,000 = £4,200 [1]. [3] (b) For going ahead: the extension is expected to add £4,200, so it more than covers its cost [1]. The sales it holds, 62,000 bars at £1.50, mean revenue of £93,000, against £60,000 if nothing is done [1]. A new flavour may attract new customers and refresh the brand [1]. It needs only 15,000 extra bars to cover its cost (9,000 ÷ 0.60), far fewer than the 22,000 forecast [1]. Against this, the 62,000 is a forecast, and if the new flavour attracts fewer customers the gain could disappear [1]. The gain of £4,200 is small compared with the £9,000 outlay, so the margin for error is thin [1]. The extension may also only delay decline, not stop it [1]. Rivals could copy a flavour quickly, reducing the benefit [1]. Judgement: go ahead, because the break-even sales are well below the forecast, but monitor sales closely and have a plan for the next renewal of the product [1]. [9] Examiner insight: A balanced evaluation is likely to use the calculation from part (a) and then weigh risks against it; a final judgement that says why is likely to read as stronger than one that restates the figures.

Where marks are usually lost

• Not writing the formula or substitution, so a slip in the final figure leaves no working to credit.
• Dividing by the new value instead of the original when calculating percentage change.
• Adding the mark-up but forgetting to add it to the unit cost.
• Giving a list of life cycle phases when the question asks for analysis linked to pricing.
• Describing a pricing strategy without linking it to the product, the rivals or the segment in the case.
• Confusing penetration and skimming.
• Writing about extension strategies in general without using the figures or the product named.
• Evaluating without reaching a judgement, or reaching one that the earlier points do not support.
• Leaving out the pound sign or units in calculations.

Next steps

• Revise with the revision notes.
• Re-read the study guide.
• Visit the Edexcel GCSE Business hub and the printable checklist.
• Take the free diagnostics.
• Book a free trial class: /trial/.

Frequently asked questions

What do these product and price practice questions cover? They follow Pearson Edexcel GCSE Business (1BS0) Theme 2 items 2.2.1 and 2.2.2: the design mix, differentiation, the product life cycle, extension strategies, pricing strategies and the influences on pricing.

How do you calculate a cost-plus price? Selling price = unit cost + (unit cost × mark-up percentage). A common slip is working out the mark-up but forgetting to add it to the unit cost.

Why should you show the formula and substitution in a calculation? If the final figure contains a slip, written working gives the examiner something to credit. Include the pound sign or units in the answer as well.

How do you recommend a pricing strategy in an exam answer? Link the strategy to the product, the rivals and the market segment in the case, then reach a judgement that your earlier points support.

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 2: Building a business, topic 2.2 Making marketing decisions, content items 2.2.1 Product and 2.2.2 Price.