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 is projected to increa... 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
Economic growth implications
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Answer
The slight increase in economic growth from 0.5% to 1% is likely to boost consumer confidence and spending. This could result in higher sales for Mumtaz, particularly if customers feel more inclined to dine out as the economy improves.
Step 2
Impact of rising inflation
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Answer
With inflation expected to rise from 1.2% to 2.7%, Mumtaz may face increased costs for supplies and wages. This could lead to higher menu prices, which might deter price-sensitive customers, impacting overall sales.
Step 3
Effect of increasing unemployment
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Answer
The rise in unemployment from 4.8% to 6.5% indicates a tighter labor market and decreased disposable income for consumers. This could lead to reduced patronage at restaurants, including Mumtaz, as consumers may cut back on non-essential spending.
Step 4
Exchange rate impact
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A weaker pound may increase the cost of importing ingredients from abroad that are priced in US dollars. This would likely increase operational costs for Mumtaz and could diminish profit margins, especially if these costs cannot be passed on to the consumers.
Step 5
Overall assessment
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In summary, Mumtaz may benefit from slight economic growth, but rising inflation and unemployment, along with increased import costs due to exchange rate changes, may negatively impact its profitability and operational strategy. The balancing of these factors will be crucial for the business moving forward.
