Photo AI
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
Knowledge of Exchange Rates
Answer
Exchange rates represent the value of one currency in relation to another. Movements in exchange rates can significantly affect the cost of holidays for UK consumers, particularly when the pound depreciates against currencies like the euro and the US dollar. For instance, when the pound falls in value, holidays priced in these currencies become more expensive, making it less attractive for consumers to travel abroad.
Step 2
Impact on UK Holiday Demand
Answer
Over the period from 2014 to 2017, the depreciation of the pound against the US dollar affected demand for holidays, as it increased the cost of overseas vacations. In contrast, this might lead to a higher demand for domestic holidays within the UK, as spending their money locally may become more appealing to consumers.
Step 3
Counterbalancing Factors
Answer
While exchange rate fluctuations are important, several factors may counterbalance their effects. For instance, increased consumer incomes could allow holidaymakers to afford overseas trips despite the higher costs. Additionally, technological advancements in online booking platforms have made it easier for consumers to compare prices and access a wider range of holiday options.
Step 4
Conclusion and Assessment
Answer
In assessing the extent to which exchange rates influence holiday choices, it is important to recognize that while they play a critical role in determining costs, they are not the sole factor. Consumer preferences, economic conditions, and availability of holiday experiences also greatly impact decision-making. Therefore, while movements in exchange rates are influential, their effect is moderated by other factors.