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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 1 - 2019 - Paper 3
Question 1
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 1 - 2019 - Paper 3
Step 1
Exchange rates and holiday pricing
Answer
Exchange rates represent the price of one currency in terms of another. Specifically, if the pound (£) depreciates against the US dollar or the euro, this increases the effective price of holidays priced in those currencies. For instance, holidays in Spain become more expensive for UK consumers if the pound weakens against the euro, potentially leading to a decrease in demand for such holidays.
Step 2
Impact on UK holiday trends
Answer
Between 2014 and 2017, the exchange rate fluctuations indicated that while the £ depreciated against the $US, the demand for holidays within the UK increased from 1.2 to 1.7 million, suggesting that higher exchange rates do not automatically decrease demand for UK holidays. This reflects a situation where UK travelers may shift their choices based on relative cost increases abroad.
Step 3
Consumer income and preferences
Answer
Increased consumer incomes during this period may have offset the effects of a weaker pound. Even with the higher costs associated with overseas vacations, many UK holidaymakers might still prefer international destinations, demonstrating that exchange rates are not the sole determinant in holiday choices.
Step 4
Technology and accessibility
Answer
The enhanced accessibility of booking technologies allows consumers to easily compare holiday options. This means that while higher exchange rates can increase the cost of overseas holidays, consumers can still secure deals or plan vacations that fit their budgets.
Step 5
Consideration of external factors
Answer
Factors such as job uncertainty, domestic demand changes, and personal preferences greatly influence holiday decisions. For instance, UK consumers may opt for staycations if they feel uncertain about their financial futures, regardless of exchange rate changes.