Economic Factors in Business Expansion | Edexcel A-Level Economics B (9EB0)
Economic Factors in Business Expansion
- 125 questions
- 9 subtopics
- Theme 3: the global economy
- Paper 2 and Paper 3
Economic Factors in Business Expansion is examined in Paper 2, Competing in the global economy, and in Paper 3, The economic environment and business.
It covers push factors: saturated markets and competition, pull factors: economies of scale and risk spreading, offshoring and outsourcing, extending the product life cycle through overseas markets, raising capacity utilisation, assessing a market: disposable income and exchange rates, ease of doing business, infrastructure and political stability, location of production: costs, labour and natural resources and location of production: trade blocs, incentives and return on investment.
Sample questions from Economic Factors in Business Expansion
Answer each one closed book first, then open the answer.
-
Push factors: saturated markets and competition
Define market penetration.
Show the answer
Market penetration is the proportion of the potential market that already buys the product, usually expressed as a percentage. -
Pull factors: economies of scale and risk spreading
How does exporting give a firm technical economies of scale?
Show the answer
A larger total market justifies investing in specialised high-output machinery and dedicated production lines whose high fixed cost is then spread over many more units. -
Offshoring and outsourcing
Give three business activities that are commonly offshored.
Show the answer
Call centre and customer service work, software development and IT support, and manufacturing assembly. -
Extending the product life cycle through overseas markets
Why is a product often at a different life cycle stage in an emerging economy than in a developed one?
Show the answer
Ownership levels are lower there and incomes are only now reaching the point at which people can afford the product, so demand is still in its early growth phase. -
Raising capacity utilisation
Why does higher capacity utilisation lower average cost?
Show the answer
Fixed costs such as rent, machinery and management do not change with output, so producing more units spreads them further and the fixed cost per unit falls. -
Assessing a market: disposable income and exchange rates
How does the income elasticity of a firm's product affect which market it should enter?
Show the answer
A firm selling income-elastic luxuries should target the markets where incomes are rising fastest, while a firm selling necessities can succeed where income growth is slower. -
Ease of doing business, infrastructure and political stability
Define infrastructure.
Show the answer
Infrastructure is the network of physical and organisational structures an economy needs to function, such as roads, railways, ports, airports, power supply, water and telecommunications. -
Location of production: costs, labour and natural resources
What is meant by the availability of labour?
Show the answer
Availability of labour is whether enough workers of the right kind can actually be recruited locally, which depends on the size of the labour force, unemployment, participation rates and competition from other employers.
The 9 subtopics
One subtopic is one session. Work down the list.
| Subtopic | What it covers | Questions |
|---|---|---|
| Push factors: saturated markets and competition | Push factors in international expansion, saturated markets and how to recognise them, squeezed margins, market penetration, rising domestic competition, mature products in developing economies, other pressures to move abroad, replacement demand, the UK grocery market, mergers, price cutting, and a strong competitor entering a niche. | 13 |
| Pull factors: economies of scale and risk spreading | Pull factors in international expansion, internal economies of scale and purchasing and technical economies from selling abroad, calculating average cost, the long-run average cost curve and minimum efficient scale, diseconomies of global scale, risk spreading across markets and production sites, and its costs. | 14 |
| Offshoring and outsourcing | Offshoring, outsourcing and offshore outsourcing, activities commonly offshored, unit labour cost against the wage rate and calculating it, core competences, time zones and customer service, the supply, reputational and intellectual property risks, reshoring, automation, and hidden costs of offshoring. | 15 |
| Extending the product life cycle through overseas markets | The stages of the product life cycle and sales and cash flow at introduction, extension strategies, selling abroad to extend the life cycle, different stages in emerging and developed economies, other extension strategies, the international product life cycle, balanced portfolios, the limits of extension, unit costs, and selling older technology abroad. | 13 |
| Raising capacity utilisation | Capacity utilisation and its formula, calculating utilisation and maximum output, lower average cost at higher utilisation and fixed cost per unit, export orders and offsetting seasonal demand, the problems of near-full capacity, spare capacity, low utilisation and competitiveness, raising utilisation without more sales, rationalisation, and fast-growing export demand. | 14 |
| Assessing a market: disposable income and exchange rates | Disposable income and its growth, misleading averages, discretionary income, income elasticity and choosing a market, purchasing power parity, how appreciation and depreciation affect exporters and investors, exchange rate risk and ways to reduce it, volatility, calculating the sterling value of overseas earnings, pegged currencies, and changing product mix. | 14 |
| Ease of doing business, infrastructure and political stability | The ease of doing business and what firms examine, corruption, contract enforcement, infrastructure and the costs of poor roads, ports, electricity and digital networks, political stability and political risks, expropriation, higher required returns, managing political risk, and why weak institutions can still attract investment. | 14 |
| Location of production: costs, labour and natural resources | The costs firms compare between countries, why the lowest wage is not the lowest cost, unit labour cost, capital against labour intensive industries, labour availability and skills, clusters, extractive industries and siting near raw materials, bulk-reducing industries, the risks of resource exploitation for host countries, and rising labour costs. | 14 |
| Location of production: trade blocs, incentives and return on investment | Locating inside a trading bloc for access to the whole market, low-wage members, countries leaving a bloc, government incentives for inward investment, special economic zones, competition for multinationals and its criticisms, bloc subsidy rules, the formula for return on investment and calculating it, hurdle rates, payback, and accepting a lower first return. | 14 |
How the guide is worked
Answering a question from memory stores it far better than reading the answer again. The guide runs that as a fixed procedure on one subtopic at a time, about twenty minutes a session.
-
Step 1 · Closed book
Cover the answers. Work through one subtopic and write down what you can. Leave blanks where you have nothing.
-
Step 2 · Open book
Go back to the top. Read each printed answer and write it out in full, including the ones you had right.
-
Step 3 · Closed book again
Same questions, same order, from memory. The gap between pass one and pass three is the session result.
Read the full method, the return schedule and the research behind it.
Nearby topics
Edexcel A-Level Economics B Active Recall Guide
Every topic, not just this one. 2,933 questions with their answers.