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Using the data in Extract C, assess the likely impact of the forecast changes in the UK economy on a business such as Mumtaz - Edexcel - A-Level Business - Question 1 - 2018 - Paper 2
Question 1
Using the data in Extract C, assess the likely impact of the forecast changes in the UK economy on a business such as Mumtaz. Economic growth (change in GDP) is exp... show full transcript
Worked Solution & Example Answer:Using the data in Extract C, assess the likely impact of the forecast changes in the UK economy on a business such as Mumtaz - Edexcel - A-Level Business - Question 1 - 2018 - Paper 2
Step 1
Assess the Impact of Economic Growth
Answer
The anticipated increase in economic growth from 0.5% to 1% suggests a more robust economy, which could positively influence consumer spending. For a business like Mumtaz, this could potentially lead to greater customer turnout and higher sales, as people may feel more confident in their financial situations.
Step 2
Evaluate the Effect of Rising Inflation
Answer
With inflation rising from 1.2% to 2.7%, operational costs for Mumtaz may increase, particularly with purchases of ingredients and supplies. This rise in costs could squeeze profit margins unless Mumtaz can pass some of these costs onto customers through increases in menu prices.
Step 3
Consider the Impact of Unemployment Changes
Answer
The increase in unemployment from 4.8% to 6.5% may negatively impact Mumtaz as a higher unemployment rate typically means reduced disposable income for consumers. People may dine out less frequently, negatively affecting restaurant revenues.
Step 4
Analyze the Effects of the Exchange Rate
Answer
A weaker pound (£) (drop from 1.23 to 0.99 in the US$ to £ exchange rate) could lead to higher costs for imported ingredients. This may be significant if a large portion of ingredients is sourced internationally, impacting pricing strategies and overall profitability.