Edexcel IGCSE Business: Government objectives and policies, and external factors (4BS1) – 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 Topic 1, sections 1.6 “Government objectives and policies” and 1.7 “External factors” in the Pearson Edexcel International GCSE in Business (4BS1) specification, Issue 2, February 2026. Read the study guide and revision notes first if the topic is new. All amounts are in dollars and all businesses are invented. See the 4BS1 Business hub and the free diagnostics too.

Questions

1. State two public services that a government may provide using money raised from taxation. [2]

2. Define the term infrastructure and explain how one example of it could help a business that delivers goods. [3]

3. Explain one constraint on how much a government can spend. [3]

4. A government places a 10% tariff on imported padlocks. A retailer buys padlocks from an overseas supplier at 30 each. A home producer sells similar padlocks at 35.

(a) Calculate the cost of one imported padlock after the tariff. [2] (b) State whether the imported padlock is now cheaper or dearer than the home-produced one. [1] (c) Explain one effect of the tariff on the retailer. [2]

5. Verlen Print has a loan of 90,000 at an interest rate of 4% a year. The rate rises to 7%.

(a) Calculate the yearly interest at each rate. [2] (b) Calculate the extra yearly cost and the percentage increase in the interest bill. [3] (c) Outline one other way the rate rise may affect Verlen Print. [2]

6. Explain why a rise in interest rates may reduce the sales of a furniture store. [3]

7. A government adds a sales tax of 8% to the price of treadmills. Sporlen Fitness sells them for 250 before tax and sells 90 a month.

(a) Calculate the tax and the price the customer pays. [2] (b) After the tax, monthly sales fall to 80. Calculate the percentage change in the number sold. [2] (c) Sporlen receives the pre-tax price. Calculate its monthly sales revenue before and after the tax. [2]

8. Marlow Textiles exports 24,000 scarves a year at 18 each to a country that is outside the trading bloc Marlow belongs to. That country introduces a 10% tariff on imported scarves.

(a) Calculate the price a customer in that country pays for one scarf after the tariff, assuming Marlow still receives 18. [2] (b) Marlow expects sales volume to fall by 15%. Calculate the new annual revenue and the fall in revenue. [3] (c) Outline one action Marlow could take in response. [2]

9. Identify the external factor (social, technological, environmental or political) shown in each statement.

(i) Newly elected leaders announce new rules on imports. [1] (ii) More shoppers choose to order groceries through a phone application. [1] (iii) The share of the population aged over 65 rises. [1] (iv) Residents complain after waste from a factory pollutes a nearby river. [1]

10. Lorrenby Foods is a small business with annual sales of 540,000. Online orders are 12% of sales. The owner expects online orders to grow by 50% over the next year if customers keep switching to ordering through its website. Other sales stay the same.

(a) Calculate the value of online orders now, and after a 50% increase, and the rise. [3] (b) Analyse how this technological and social change could affect Lorrenby Foods. [5]

11. Tarwick Plastics is a large business. It has a loan of 400,000 at 4%, and the rate is expected to rise to 7%. Its profit before interest is 95,000. A new environmental law will also require equipment costing 60,000 as a one-off payment. The directors are considering delaying a planned expansion.

(a) Calculate the yearly interest at 4% and 7%, and the extra cost. [3] (b) Evaluate whether Tarwick Plastics should delay its expansion. [5]

12. Kestrel Bikes needs 5,000 frames. An overseas supplier charges 52 each, but a 25% tariff applies to imports. A home supplier charges 61 each. The imported frames are lighter and sell at a higher price, but take six weeks to arrive. The home supplier delivers within two days.

(a) Calculate the total cost of 5,000 frames from each supplier and the difference. [3] (b) Justify which supplier Kestrel Bikes should choose. [3]

Answers

1. Any two from: health care, education, policing, defence, public transport [1] [1]. [2] Examiner insight: Name two distinct services; two names for the same service, or a private business, gain no credit for the second.

2. Infrastructure is the basic physical networks, such as roads, rail, ports, power and communications, that businesses rely on [1]. A good road network cuts delivery times [1], so the firm can serve more customers or use less fuel and driver time [1]. [3] Examiner insight: The example must be tied to a delivery business; a general statement that infrastructure “is useful” does not answer the question set.

3. Tax revenue is limited [1], because raising taxes too far upsets voters and businesses [1], so the government cannot raise unlimited money to spend [1]. (Accept borrowing must be repaid with interest, or opportunity cost, with two developed points.) [3] Examiner insight: An “explain” answer gives one fact then expands it twice. Listing three constraints with no development spreads the points too thin.

4. (a) Tariff = 30 × 10% = 3 [1]. Cost = 33 [1]. (b) The import at 33 is still cheaper than 35 [1]. (c) The retailer’s cost per padlock rises by 3 [1], so it must raise its price or accept a lower profit on each one [1]. Examiner insight: Part (b) needs a comparison of the two numbers you have, so write both figures. A tariff does not always make imports dearer than home goods.

5. (a) 90,000 × 4% = 3,600 [1]; 90,000 × 7% = 6,300 [1]. (b) Extra = 6,300 − 3,600 = 2,700 [1]. Percentage increase = 2,700 ÷ 3,600 × 100 [1] = 75% [1]. (c) Higher borrowing costs reduce profit [1], so it may delay buying new machines [1]. (Accept demand falling as customers borrow less.) Examiner insight: The base for a percentage increase is the original bill, 3,600, not the new one. Dividing by 6,300 gives a different result.

6. Furniture is often bought on credit [1]. A rise in rates makes borrowing dearer, so monthly payments are higher [1], and fewer customers will buy, so sales fall [1]. [3] Examiner insight: Naming the link to credit is the step that earns the explanation; “people have less money” with no mention of borrowing is a weaker chain.

7. (a) Tax = 250 × 8% = 20 [1]. Customer pays 250 + 20 = 270 [1]. (b) (80 − 90) ÷ 90 × 100 [1] = −11.1% (a fall of 11.1%) [1]. (c) Before: 90 × 250 = 22,500 [1]. After: 80 × 250 = 20,000 [1]. Examiner insight: Use the pre-tax price in (c), because the sales tax is passed to the government. Using 270 would overstate Sporlen’s revenue.

8. (a) Tariff = 18 × 10% = 1.80 [1]. Customer pays 19.80 [1]. (b) New volume = 24,000 × 85% = 20,400 [1]. New revenue = 20,400 × 18 = 367,200 [1]. Old revenue = 432,000, so fall = 64,800 [1]. (c) Cut its price to offset the tariff [1], or find a market inside the bloc where no tariff applies [1]. Examiner insight: For (b), show the old revenue as well as the new, as the fall needs both figures. Identify the action in (c) and add why it helps.

9. (i) Political [1]. (ii) Technological [1]. (iii) Social [1]. (iv) Environmental [1]. [4] Examiner insight: One word per statement is enough. Statement (iv) could be argued as social (resident complaints), but pollution is the stronger link, so name the factor the statement leads with.

10. (a) Now: 540,000 × 12% = 64,800 [1]. After: 64,800 × 1.5 = 97,200 [1]. Rise = 32,400 [1]. (b) More online orders widen the customer base beyond the local area [1], which could raise sales above the 540,000 level [1]. It may need to spend on a website, an application and delivery [1], which raises costs and could cut the profit made on each order [1]. A small business may have fewer staff to handle the extra work, so it must decide whether the extra sales outweigh the cost [1]. [8 in total] Examiner insight: In “analyse”, each point should be developed into a consequence for this business. Use the figures from (a) in the answer rather than leaving them behind.

11. (a) Interest at 4% = 400,000 × 4% = 16,000 [1]. At 7% = 28,000 [1]. Extra = 12,000 [1]. (b) Profit after interest falls from 79,000 at 4% to 67,000 at 7%, because 95,000 − 16,000 = 79,000 and 95,000 − 28,000 = 67,000 [1]. The one-off 60,000 for equipment comes on top, so the first-year extra burden is 72,000 [1]. An expansion would probably need more borrowing at the higher rate, which supports delay [1]. Against this, the equipment must be bought whatever is decided, as the law applies either way, and a delay could let rivals take market share [1]. Overall, Tarwick should delay the expansion while rates are expected to rise, because 72,000 is a large share of its 95,000 profit before interest, and it can restart once costs are clearer [1]. [5] Examiner insight: An “evaluate” answer needs a stated judgement supported by the figures. Presenting both sides without choosing one leaves the question unanswered.

12. (a) Imports: 52 × 1.25 = 65 each; 65 × 5,000 = 325,000 [1]. Home: 61 × 5,000 = 305,000 [1]. Difference = 20,000 [1]. (b) The home supplier is 20,000 cheaper, because the tariff erases the import’s price advantage [1]. The imports are lighter, which could justify a higher selling price, but six weeks’ delay ties up cash and risks missed sales [1]. Kestrel should choose the home supplier, because lower cost and quick delivery outweigh the benefit of the lighter frame unless the extra selling price exceeds 4 per frame [1]. [3] Examiner insight: A “justify” answer must pick one option and give a reason drawn from the information provided; recommending without referring to the 20,000 or the delivery times does not use the data.

Where marks are usually lost

• Writing a general point about government policy without saying how it affects the business in the stem.
• Treating a tariff as a tax on exports instead of imports.
• Calculating the percentage increase from the new figure instead of the original.
• Confusing percentage points with percentage change when rates rise.
• Using the customer price including tax as the business’s revenue.
• Listing external factors without linking one to a decision.
• Giving one side only in evaluate and justify questions, or stopping without a conclusion.
• Ignoring figures supplied in the case study.

Next steps

Review the revision notes and the study guide. Go back to the 4BS1 Business hub, tick off progress on the checklist, take the free diagnostics, or book a free trial class.

Frequently asked questions

What do these government policy and external factors questions cover? They follow Pearson Edexcel International GCSE Business (4BS1) sections 1.6 and 1.7: government spending and taxation, infrastructure, legislation, trade policy, interest rates and social, technological, environmental and political factors.

Is a tariff a tax on imports or exports? A tariff is a tax on imported goods. Treating it as a tax on exports is a common error.

What is the difference between a percentage point and a percentage change? If an interest rate rises from 5% to 8%, it has risen by 3 percentage points, but the interest bill on the same loan rises by 60%. Confusing the two loses marks.

Should you use the price including sales tax as a business’s revenue? No. The tax added to the customer price goes to the government, so the business’s revenue is based on the price before tax.

Official syllabus

Pearson Edexcel International GCSE in Business (4BS1), Specification, Issue 2, February 2026, published by Pearson Education Limited. Topic 1: Business activity and influences on business, sections 1.6 and 1.7.