Refer to lines 36–40. Calculate the estimated change in quantity demanded if CD increases the price of its detergent from $4.00 to $4.60.

Mark scheme

Marking points from the official mark scheme (Feb/Mar 2024). The mark or mark type is shown in brackets.

1. (a) PED = % change in Qd / % change in price and/or % change in Qd = PED × % change in price (1 mark)
2. [1] (a) Percentage increase in price = 0.6 / 4 × 100 = 15%
3. [3] (a) % change in Qd = 15 × -0.6
4. [4] (a) % change in Qd = –9% OR a reduction of 9000 units
5. A01 Knowledge and understanding: (b) New product development is the design, creation and marketing of new goods and services.
6. A01 Knowledge and understanding: (b) Research and development is the scientific research and technical development of new products and processes.
7. A01 Knowledge and understanding: (b) Benefits of new product development: Attract repeat purchase by offering a product that is new and better.
8. A01 Knowledge and understanding: (b) Benefits of new product development: Meet customer needs more effectively.
9. A01 Knowledge and understanding: (b) Benefits of new product development: Gain a competitive advantage over competition.
10. A01 Knowledge and understanding: (b) Benefits of new product development: Product differentiation.
11. A01 Knowledge and understanding: (b) Benefits of new product development: Control over pricing.
12. A01 Knowledge and understanding: (b) Benefits of new product development: Refresh the brand.
13. A01 Knowledge and understanding: (b) Benefits of new product development: Cost of product development.
14. AO2 Application: (b) Competitive market.
15. AO2 Application: (b) Consumer product tests showing CD products not as good for cleaning.
16. AO2 Application: (b) Environmental credentials of CD have been questioned.
17. AO2 Application: (b) Cost of R&D – increase in expenditure to 3% of revenue (that would be $639 000 in 2024).
18. AO2 Application: (b) Shareholder pressure for returns.
19. AO2 Application: (b) Reference to price inelastic demand (-0.6).
20. AO3 Analysis: (b) Improvements in cleaning power of products will maintain consumer interest and prevent the product becoming less effective relative to products of competitors. This will result in higher sales and increased profit.
21. AO3 Analysis: (b) R&D can improve sustainability of CD's cleaning products further differentiating them from MNCs and attracting customers.
22. AO3 Analysis: (b) R&D can enable CD to launch new products and maintain growth in revenue which can help meet shareholder expectations for higher returns.
23. AO3 Analysis: (b) Improved products could make CD's detergents more price inelastic.
24. AO3 Analysis: (b) R&D is costly and may therefore negatively impact CD's cashflow and liquidity.
25. AO3 Analysis: (b) R&D may be classified as an operating expense and can therefore result in a decrease in profit.
26. AO4 Evaluation: (b) Without product development CD will lose its competitive edge in the market. Products need to be continually improving.
27. AO4 Evaluation: (b) Can R&D match the results of the spending by MNCs which will be significantly more than CD can afford?
28. AO4 Evaluation: (b) R&D is risky and may not bring improvements to products.
29. AO4 Evaluation: (b) Is product development the most important factor to future success: Role of marketing to support new products.
30. AO4 Evaluation: (b) Is product development the most important factor to future success: Role of marketing research as part of NPD.
31. AO4 Evaluation: (b) Is product development the most important factor to future success: Competitor decisions.