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GCSE Economics Coursework

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GCSE Economics Coursework To What Extent have rising Interest Rates & Other External Influences Had on Demand, Costs & Profitability of D & D Newsagents For my economics coursework, I will be investigating "How recent interest rises have affected the business in terms of increased costs and reduced demand, and how they have responded to these changes." Since the 07th August 2003, interest rates have steadily increased in increments of .25% on the; November 2003, 05th February 2004, 06th May 2004, 10th June 2004, and 05th August 2004. 6th Feb 03 3.75 10th July 03 3.5 6th Nov 03 3.75 5th Feb 04 3.75 6th May 04 4.25 10th Jun 04 4.50 5th Aug 04 4.75 10th Feb 04 4.75 The interest rates have risen in total, by 1.25% from 10th July 03. This is most likely due to spiralling house prices, due to the fact that interest rates have been so low recently, that more and more people are taking out house loans. This may be to buy a new house, or to extend their current house. This means that people with existing loans will be paying more per month to cover the higher rate of interest; this means that they will have less disposable income which means that luxuries will have to be reduced, also people will be encouraged to save their money in banks instead of spending it because they will get a greater reward for saving, so in theory if interest rates rise the amount that people spend should decrease. ...read more.


These are all big firms, so would benefit from Scales of Economy. The economies of scale that these larger supermarkets may benefit from are- o Managerial Economies of Scale, by which larger firms can afford to employ specialist managers, making the business more efficient and profitable. o Diversifying, the larger firms can afford to sell different kinds of products, protecting the business if one product fails o Financial, the larger firms are able to get larger loans more easily from the bank, at lower interest rates, because they have more capital, and are more likely to pay it back. o Advertising, the larger firms can afford to advertise their business, attracting more customers. o Mass production, the larger firms can mass produce their products reducing the fixed costs per item, making the products cheaper to manufacture. o Bulk Buying, the larger firms can buy raw materials in bulk, reducing the costs of each item. The newsagents are at a disadvantage to the supermarkets because they do not get as large economies of scale so the supermarkets can charge lower prices, undercutting the newsagents market, but the larger firms suffer from Diseconomies of scale, where the business is so large it starts to become a disadvantage. The smaller newsagent does not suffer from these. The diseconomies of scale are- o Losing touch with the customers, the smaller newsagents is a more friendly and helpful shop to visit than the supermarkets. o The managers lose touch with the workers causing demoralisation, whereas there is only one worker in the newsagents, apart from the owner, and he is a friend of the owner. ...read more.


Since the fertility and birth rates have increased, in 5-10years, when these babies grow up, they will form part of the newsagent's customer market for confectionary. Conclusion The Newsagents is affected by many different influences, some in positive ways such as the fact that sales of certain products (alcohol, cigarettes, lottery) increase during times of increased inflation, interest rates and taxes, and some in negative ways, such as larger competition and social factors. But the newsagents has survived changes in the past, and there is no sign that this is going to change, mainly because of the convenience factor that it offers nearby customers, and that fact that almost all the goods sold are price & income inelastic, due to the fact they make up small portions of peoples income. If the shop were to be affected in the future, I would recommend achieving economies of scale, as this will allow them to compete with their competition on a more even level. Since it is not easy to achieve economies of scale, as it takes time, I would recommend diversifying, as it will allow the Shop access to new markets, and therefore profits, as well as advertising, even if it is on a small scale, i.e., local newspaper or shop window advertisements, to raise awareness of the shop to potential customers. I would also recommend maintaining the Strengths that the shop has, such as the newspapers and magazines, and possibly dropping the weaker lines, such as the children's toys, currently offered for the social benefit it offers mothers with children, but if the shop comes into financial difficulty, it will need to make sure it is as profitable as possible. ?? ?? ?? ?? Ryan Bebbington ...read more.

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