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Assess the extent to which movements in exchange rates might influence the holiday choices of UK consumers. - Edexcel - A-Level Business - Question 2 - 2019 - Paper 3
Question 2
Assess the extent to which movements in exchange rates might influence the holiday choices of UK consumers.
Worked Solution & Example Answer:Assess the extent to which movements in exchange rates might influence the holiday choices of UK consumers. - Edexcel - A-Level Business - Question 2 - 2019 - Paper 3
Step 1
Exchange rates and holiday prices
Answer
Exchange rates are the price of one currency in terms of another. A depreciation of the pound (£) can make holidays priced in Euros or US dollars more expensive for UK consumers. For example, if the pound depreciates against the US dollar, booking a holiday in a destination like the USA would cost significantly more than before. This could deter consumers from traveling overseas, leading them to choose more domestic holidays instead.
Step 2
Trends in holiday choices
Answer
Data shows that the trend in UK holidays has increased from 1.8 in 2014 to 2.1 in 2016. This might suggest that despite exchange rate fluctuations, some consumers still prefer traveling within the UK, possibly due to the higher costs associated with international travel. However, the increase in demand for local holidays may also result from various factors like improved domestic tourism infrastructure and marketing.
Step 3
Counterarguments to exchange rate influence
Answer
It is important to consider potential counterarguments. Even with a depreciated pound, increased consumer incomes might enable some families to continue traveling abroad. Furthermore, technological advancements have improved accessibility, allowing consumers to budget and book holidays more efficiently, possibly mitigating the effects of unfavorable exchange rates on their holiday choices.
Step 4
Additional influencing factors
Answer
Moreover, other factors may also influence holiday choices, such as changing consumer preferences, job security, and economic stability. For instance, job security may lead to increased spending on holidays both abroad and domestically. Additionally, the demand for holidays can also be influenced by cultural experiences or personal preferences, such as the desire for foreign cuisines or activities.