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A store which sells frozen food buys oven chips for 29p a pack - OCR - GCSE Business - Question 14 - 2021 - Paper 1
Question 14
A store which sells frozen food buys oven chips for 29p a pack. The store usually sells the oven chips for 99p a pack. How much should the store charge for the oven... show full transcript
Worked Solution & Example Answer:A store which sells frozen food buys oven chips for 29p a pack - OCR - GCSE Business - Question 14 - 2021 - Paper 1
Step 1
How much should the store charge for the oven chips if it wishes to use them as a loss leader?
Answer
To define a loss leader, it is essential to understand that this pricing strategy involves selling a product at a price below its market cost to attract customers, typically to encourage them to purchase additional, more profitable items.
Given that the store buys the oven chips for 29p per pack, pricing them at:
- 29p a pack (Option A) would mean no loss and does not meet the criterion of a loss leader.
- Between 29p and 99p a pack (Option B) could be considered, but it does not explicitly indicate a loss.
- Less than 29p a pack (Option C) would ensure the store incurs a loss, making it a valid strategy for a loss leader.
- More than 99p a pack (Option D) would be counterproductive as it exceeds both the cost price and the usual selling price.
Thus, the most appropriate answer for the price that would classify the oven chips as a loss leader is C) Less than 29p a pack.