Business catalogue web ready 2025 - Flipbook - Page 9
AQA GCSE
Look inside
Brand new and
updated case studies from
real-world businesses
2 Influences on business
On the other hand, some businesses do sell goods and services whose sales
vary considerably when consumers’ incomes change. These products are likely
to be luxury and non-essential items. Examples include designer handbags and
organic foods. These products are called income elastic products as their sales
are sensitive to changes in consumers’ incomes.
Thus, businesses that produce some products may experience significant
fluctuations in their sales as consumers’ incomes change. Others may
experience fewer changes as their products are not income elastic, or perhaps
are less income elastic.
Key term
Income elastic
products are those
whose sales are sensitive
to changes in consumers’
incomes.
Products that are income elastic
Products that are not income elastic
The sales of income elastic products are sensitive to changes
in consumers’ incomes. For example, a fall in incomes is
likely to result in a substantial fall in sales of these products.
Many of these products are luxury products.
The sales of products that are not income
elastic are relatively unaffected by changes in
consumers’ incomes. Many of these products are
essential for consumers; some may be addictive.
For example:
Luxury travel
Fine wines
New kitchens and bathrooms
Gym memberships
Sports cars such as Ferraris
For example:
Basic foods, such as bread, milk and eggs
Tobacco products
Bus travel
Petrol and diesel for cars
Tap water
Key terms defined
throughout
End-of-chapter
summaries to consolidate
understanding
Business insight
sections to
enhance students’
knowledge
Table 2.2 Examples of products that are income elastic and those that are not income elastic
2.3 The economic climate of business
Business insight
Ryanair’s sales unaffected by consumers’ income levels
Ryanair is best known for providing cheap 昀氀ights throughout Europe. Its website
advertises 昀氀ights to European cities such as Aarhus (Denmark) and Warsaw
(Poland) for as little as £10 one-way. The company has successfully lowered its
prices over time.
By selling 昀氀ights very cheaply, it has increased its sales enormously. In 1990,
it had 745,000 passengers. By 2019, the 昀椀gure had risen to 139.6 million. Its
passenger numbers have grown steadily since 2000, even when consumers’
incomes were falling.
Explain one reason why Ryanair’s sales continued to rise even when
consumers’ incomes were falling.
(2 marks)
Summary
Rising incomes normally lead to higher sales of luxury products, such as sports cars, while demand for other
products, such as travelling by bus, can fall.
Businesses are in昀氀uenced by changes in the economic
climate. Fluctuations in the level of interest rates
or the level of employment are likely to affect most
businesses. Changes in consumers’ income will affect
many. Those selling income elastic products will be
affected most.
96
Quick questions
1 Explain the term ‘economic climate’.
Quick questions
reflecting the command
words and question styles
in the exam papers
(2 marks)
2 Which of the following is most likely to be a
sign of an improving economic climate?
(a) A rise in the number of people who do
not have jobs but are looking for one
(2 marks)
6 Explain one reason why house builders
might be affected by a rise in interest rates.
(2 marks)
(b) A rise in the number of businesses
that are forced to cease trading as they
cannot repay loans
(c) A rise in the number of people in employment
(d) A rise in the number of people moving
(1 mark)
overseas for work
3 Explain the term ‘interest rates’.
5 Explain one possible effect of falling
interest rates on a business.
(2 marks)
4 State two changes that might occur when
(2 marks)
an economic climate is weakening.
7 Explain one possible effect of falling levels
(2 marks)
of employment on UK businesses.
8 Explain the term ‘consumer spending’.
(2 marks)
9 State two luxury goods whose sales
might be affected significantly by a fall in
consumer spending.
(2 marks)
10 Explain one reason why a bakery’s sales of
bread may not be affected significantly by a
(2 marks)
fall in consumers’ incomes.
97
Sample pages from AQA GCSE (9–1) Business, Third Edition
View pricing at hachettelearning.com/catalogues
Return to the contents page
6
