OCR A Level Business: The market, market size and growth and Demand and supply (H431) – 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 the market, market size and growth and demand and supply in the External influences area of the OCR Advanced GCE in Business (H431) Specification, Version 2.1 (January 2026). All businesses and figures are invented. Teaching is in the study guide and the revision notes. Course hub: OCR A Level Business. Checklist: printable checklist. Find weak spots with the free diagnostics. Wider topic practice: external influences practice.

Questions

1. (a) Define the term “market”. [2] (b) Define the term “competition”. [2]

2. Nuttall Oat Drinks sells in a regional market. Total market sales were £62.5m last year and £70m this year. Nuttall’s sales were £14m last year and £15.4m this year.

(a) Calculate the market growth rate. [2] (b) Calculate Nuttall’s market share in each year. [3] (c) Explain what the change in market share shows. [2]

3. Explain two reasons why market size is important to a business. [4]

4. Describe two key features of a monopoly and two key features of monopolistic competition. [4]

5. Ambrey Trainers sells in a market where three firms hold 90% of sales. All three advertise heavily and watch each other’s prices closely. Analyse how this market structure affects Ambrey’s decision making power. [6]

6. Vessey Print is a local print shop. It completed 9,000 jobs last year in a market of 120,000 jobs. Two national online printers charge less than Vessey. Vessey is known locally for fast turnaround, and the owner has £40,000 of spare cash.

(a) Calculate Vessey’s market share. [2] (b) Evaluate how Vessey could increase its market share. [8]

7. The weekly market for commuter bicycles in a city has demand QD = 1,200 − 40P and supply QS = 60P − 300, where P is price in pounds and quantities are bicycles. Wrenlow Cycles is one supplier.

(a) Work out the equilibrium price and quantity. [3] (b) Calculate the excess at a price of £18 and state whether it is excess supply or excess demand. [2] (c) Calculate the excess at a price of £12 and state which type it is. [2]

8. Using the market in question 7 as the starting position, the cost of aluminium rises so that supply becomes QS = 60P − 480, with demand unchanged.

(a) Explain, with reference to a demand and supply diagram, what happens to equilibrium price and quantity. [4] (b) Calculate the change in total market revenue. [3]

9. State two determinants of supply. [2] Explain how a change in one of them could affect the price a business sets. [2]

10. Cobhurst Tea Rooms bakes 2,400 cakes a week, each costing £1.80 to make. It sells 1,900 at £3.50. Cakes stay fresh for two days. Evaluate the effects of this excess supply on Cobhurst. [8]

11. Return to the market in question 7. A fall in the popularity of cycling lowers demand to QD = 1,000 − 40P, with supply as in question 7. Wrenlow has already ordered stock and pays fixed rent. The fall is expected to last several months.

(a) Find the price and quantity at the new equilibrium. [3] (b) Calculate the new market revenue and its change. [2] (c) Recommend and justify how Wrenlow should respond. [6]

Answers

1. (a) A market is a setting, physical or online, where buyers and sellers meet [1] to trade a good or service [1]. [2] (b) Competition is rivalry between businesses [1] seeking to win the same customers [1]. [2] Examiner insight: A definition gains from containing both parts of the idea; “where people buy things” alone leaves out the sellers.

2. (a) (70 − 62.5) ÷ 62.5 × 100 [1] = 12% [1]. [2] (b) Last year: 14 ÷ 62.5 × 100 [1] = 22.4% [1]. This year: 15.4 ÷ 70 × 100 = 22.0% [1]. [3] (c) Share fell slightly, from 22.4% to 22.0% [1], because Nuttall’s sales grew by 10% (1.4 ÷ 14) while the market grew by 12%, so rivals grew faster [1]. [2] Examiner insight: Showing the formula with the numbers placed in it helps an answer earn partial credit if an arithmetic slip follows; comparing the firm’s growth with the market’s growth is what turns a figure into an explanation.

3. Reason 1: market size shows the potential sales revenue available [1]; a firm in a small market cannot sell far more than the market holds without taking sales from rivals, so it sets realistic targets [1]. Reason 2: it influences investment decisions [1]; a large market may justify new capacity and economies of scale, whereas a small one may not repay the cost [1]. Other valid reasons include attractiveness to new entrants and saturation. [4] Examiner insight: Each reason needs a “because” or “so” link to a consequence for the business; a bare list of reasons usually earns less.

4. Monopoly: one dominant seller [1] and high barriers to entry or no close substitutes [1]. Monopolistic competition: many sellers [1] offering differentiated products, with low barriers to entry [1]. [4] Examiner insight: Describing is not the same as comparing; two clear features per structure is what the question asks for, and extra features add nothing.

5. Few firms hold most of the market, so Ambrey is interdependent with the other two [1]. A price cut by Ambrey could be matched quickly [1], so it gains little share and loses margin; its freedom over price is therefore limited [1]. Heavy advertising suggests the firms compete on non-price factors [1], so Ambrey’s real decisions are about branding, design and promotion rather than price [1]. High barriers protect the three firms from new entrants, which gives Ambrey some power over output and strategy, but only as long as it stays in step with its two rivals [1]. [6] Examiner insight: Good analysis runs from structure, through behaviour, to the decision; naming “oligopoly” alone does not show how power is affected.

6. (a) 9,000 ÷ 120,000 × 100 [1] = 7.5% [1]. [2] (b) Price cuts could attract price-sensitive buyers from the online printers [1], but the national firms may cut further and Vessey’s margins would shrink [1]. Promoting its fast turnaround to local firms builds on an existing strength [1], and £40,000 could fund a local campaign, though it may not convert into sales if customers still compare prices [1]. Buying a small local rival would add share at once [1], but it could use up most of the cash and bring integration problems [1]. Organic growth, such as widening the product range, is lower risk but slower [1]. Judgement: promoting turnaround speed is the best first step because it uses a strength that online rivals cannot easily match and is affordable [1]. [8] Examiner insight: Evaluation usually gains most when each option is tested against facts in the stem, such as the spare cash and the rivals’ lower prices, and the answer ends with a choice and a reason.

7. (a) 1,200 − 40P = 60P − 300 [1], so 1,500 = 100P and P = £15 [1]. Q = 1,200 − 600 = 600 bicycles [1]. [3] (b) At £18, QD = 480 and QS = 780 [1], so there is excess supply of 300 [1]. [2] (c) At £12, QD = 720 and QS = 420 [1], so there is excess demand (a shortage) of 300 [1]. [2] Examiner insight: Stating the type of excess as well as its size matters, since the number alone does not show whether price is above or below equilibrium.

8. (a) Higher aluminium costs mean suppliers offer less at every price [1], so the supply curve shifts left [1]. At the old price of £15, quantity demanded (600) exceeds quantity supplied (420), a shortage of 180 [1]. Price rises to £16.80 and quantity traded falls to 528, giving the new equilibrium [1]. [4] (b) Old revenue: 15 × 600 = £9,000 [1]. New revenue: 16.80 × 528 = £8,870.40 [1]. Change: a fall of £129.60 [1]. [3] Examiner insight: Naming the curve that shifts, the direction and the reason before quoting the new equilibrium is the order that shows understanding; a diagram described without the cause tends to earn less.

9. Any two of: costs of production, technology, number of firms, taxes and subsidies, weather [1] [1]. Example: a rise in energy costs shifts supply left [1], so, with demand unchanged, the equilibrium price rises and a business may raise its prices or absorb the cost depending on its market power [1]. [4] Examiner insight: Both determinants must be real determinants of supply; “price” itself is a movement along the curve and not a determinant to list.

10. Excess supply of 500 cakes (about 21% of output) is wasted or must be sold cheaply [1]. At £1.80 each, the lost production cost is £900 a week [1]. Because cakes last only two days, storage is not an option, which makes the excess more costly [1]. Cobhurst may cut prices late in the day or offer deals [1], which could clear stock but cut margin per cake from £1.70 and might train customers to wait for discounts [1]. Baking fewer cakes would cut waste [1], but risks lost sales on busy days, which would reduce revenue [1]. Judgement: the cost is serious, but cutting output towards the 1,900 sold, with a small buffer, is the best response because it removes most waste without relying on discounting [1]. [8] Examiner insight: Using the figures in the stem to size the problem, and weighing price cuts against output cuts, are the habits that separate evaluation from description.

11. (a) 1,000 − 40P = 60P − 300 [1], so 1,300 = 100P and P = £13 [1]. Q = 1,000 − 520 = 480 bicycles [1]. [3] (b) New revenue: 13 × 480 = £6,240 [1], a fall of £2,760 from £9,000 [1]. [2] (c) Demand has shifted left, so price and quantity both fall [1]; Wrenlow should expect lower prices and fewer sales for months [1]. Reducing stock orders limits unsold stock, since the fall is expected to last [1]. Fixed rent cannot be cut easily, so Wrenlow should protect revenue by offering services such as repairs, which do not depend on selling new bicycles [1]. Matching the lower market price of about £13 keeps it competitive, but discounting existing stock cuts margin [1]. Judgement: the best response is to cut orders, price at the new market level and add services, because the fall is lasting and ignoring it would leave costly stock unsold [1]. [6] Examiner insight: A recommendation is stronger when it responds to the fact that the downturn is lasting and states a reason; generic advice to “advertise more” rarely fits a falling market.

Where marks are usually lost

• Dividing growth by the new figure instead of the old.
• Treating market share and sales growth as interchangeable.
• Leaving out units, a percentage sign or the word “excess” or “shortage”.
• Describing a diagram without naming which curve shifts and why.
• Reading a fall or rise in a product’s own price as a move of its demand curve.
• Describing a market structure without linking it to decision making power.
• Listing options in an evaluation without testing them against the stem.
• Ending an “evaluate” or “recommend” answer without a clear, reasoned judgement.

Frequently asked questions

What is the most common mistake when calculating market growth? The most common mistake is dividing the change by the new figure instead of the original one. Market growth is the change in market size divided by the starting size, multiplied by 100.

Are market share and sales growth the same thing? No. Market share is a business’s sales as a percentage of total market sales, while sales growth is the change in the business’s own sales. A firm’s sales can grow while its market share falls if the market grows faster.

How do you answer a demand and supply diagram question? Name the curve that moves, its direction and the cause, then show the new equilibrium and compare its price and quantity with the original. In OCR A Level Business (H431) only shift both curves if the question describes two separate changes.

How do you find equilibrium price from demand and supply equations? Set quantity demanded equal to quantity supplied, solve for price, then substitute that price back into either equation to find the equilibrium quantity. Showing each line of working protects method marks.

Next steps

• Review the revision notes.
• Re-read the study guide.
• Check the OCR A Level Business hub and the checklist.
• Take the free 10-minute diagnostics.
• Book a free trial class.

Official syllabus

OCR, Advanced GCE in Business (H431) Specification, Version 2.1 (January 2026), External influences: the market, market size and growth, and demand and supply.