(a) Refer to lines 35–37. Calculate the:

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2022). The mark or mark type is shown in brackets.

1. [1] Formula: PED = % change in quantity demanded / % change in price
2. [1] % change in quantity demanded = 3500 / 9500 X 100 = −36.84
3. [1] % change in price = $2 / $10 X 100 = +20%
4. [3] = - 36.84 / 20 OR –37 / 20
5. [4] PED = - 1.842 (Accept -1/85)
6. [3] 1.842 OR 1.85
7. [1] Formula: total contribution = total revenue – total variable costs OR Contribution per unit = price – unit variable cost
8. [1] Total contribution at $10 = ($10 - $3.50) X 9500 = $61 750
9. [1] Total contribution at $12 = ($12 - $3.50) X 6000 = $51 000
10. [3] $61 750 - $51 000
11. [4] Change in contribution will be -$10750
12. [3] Change in contribution will be 10 750 or $10 750
13. [4] 17.4% less
14. [3] 17.%
15. [1] The meaning and importance of PED in terms of impact of price changes on demand and total revenue
16. [1] The meaning and importance of contribution per unit and total contribution to fixed costs
17. [1] The importance of other factors when making pricing decisions, such as fixed costs
18. [1] The relevance of business objectives to pricing strategies, such as social objectives
19. [1] Use of calculations
20. [1] PED for local visitors is -1.842, therefore price elastic
21. [1] Total contribution from local visitors will decrease with the price increase
22. [1] Evidence suggests PED for foreign visitors is less price sensitive
23. [1] Foreign visitors will typically spend more in the park as they also book safari drives and bird watching tours. They may be happy to pay more than $12 (most would pay up to $15)
24. [1] The social enterprise also gains funding from other sources, such as the $1.5m grant for expansion, and wildlife charities
25. [1] The social objectives, such as education and conservation will also be important
26. [1] Higher entry price will have a negative impact on local visitor numbers.
27. [1] What might be the effect of this on MAA's education and conservation objectives
28. [1] Higher entry price seems not to impact foreign visitors, so increase in revenue in this case
29. [1] Possible opportunity of charging higher prices only to foreign visitors, this would mean no fall in either type of visitors
30. [1] Impact and importance of non-financial objectives and importance for MAA's stakeholders and reputation.
31. [1] Decision and justification of whether higher prices should be changed for all customers
32. [1] Evaluation of alternatives, such as price discrimination
33. [1] Is visitor revenue, local and foreign, the most important source of funding?
34. [1] What are the most important objectives for MAA?
35. [1] Other useful information – trend of figures or comparison with similar businesses.