The retail trade consists of many small-scale shopkeepers, several types of large-scale retailers and an increasing number of online retailers.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2014). The mark or mark type is shown in brackets.

1. [2] (a) (i) Any two functions × 1 mark each – Selling goods/services to consumers Providing conveniently sited shops Providing a wide variety of goods Offering delivery Offering advice/after sales service Displaying goods for sale Clearing production lines of manufacturers Supplying wholesalers/manufacturers with information about customers/their tastes Adding value to goods Provides goods in small quantities Advertising goods Provides credit. Any other relevant function. No marks for buying from wholesalers/storage.
2. [1] (ii) One mark for department store/supermarket/hypermarket/multiple chain/variety chain store
3. [4] (iii) Any two reasons explained × 2 marks each – Able to bulk buy direct from manufacturers/ and so obtain discounts As they purchase at discounted prices/ they are able to offer lower prices to consumers Use computerised systems/ that enable them to have tight stock control /so reducing wastage Can act as their own wholesalers/ using regional distribution centres May have strong purchasing power/ so can lay down specific standards from their suppliers May have their own delivery vehicles/ to supply their shops/deliver to customers Can take advantage of economies of scale/e.g. national advertising Greater variety/leading to one stop shopping Provide self-service/enabling shoppers to shop in their own time Offer other facilities to customers/such as petrol station or coffee shop Provide parking/to enable shoppers to shop in bulk. Any other relevant point.
4. [4] (b) (i) Any four points × 1 mark each and up to 2 marks for a well-developed point – To provide protection against financial loss To enable the fortunate to assist the unfortunate by spreading risk among a large number of people To provide compensation against loss To help build business confidence To transfer risk to the insurer To assist businesses who are sued by their employees or by the general public To enable businesses to continue is a loss occurs – consequential loss. Allow examples = 2 marks max Any other relevant point.
5. [3] (ii) $400000 + $50000 = 8 (1 mark) $28 × 8 (1 mark) = $224 (1 mark) OFR applies. If the correct answer is given without working, award full marks.
6. [6] (iii) Level 2 (4-6 marks) Has discussed the relationship between pooling of risk and the level of insurance premium paid and has given a reasoned opinion. Premiums create a common fund or pool from which claims are made. This pooling of risk means that the fortunate help the unfortunate – everyone shares the risk. From this pool compensation is paid to those making claims. It should also provide enough funds for administrative costs and for the insurance company's profits. It is sometimes thought that the larger the pool, the less the premium that will need to be paid. If the pool is large i.e. has a large number of policyholders, there will probably be a larger number of people making claims. But if the pool is small e.g. footballers insuring against injury, the premiums will need to be high to cover any claims that are made. The level of insurance premium paid, however, is usually affected by the level of risk involved(the higher the risk, the higher the premium). Using the example of the footballers insuring against injury, the premiums would be high because the risk of injury occurring is very high and so there will be many claims. Insurance companies keep records of past statistics of claims. On the basis of this statistical evidence, and personal information given in the insurance proposal form, premiums are calculated. The level of premium paid is largely affected by the level of risk but it may also depend on the size of the pool of premiums. Level 1 (1-3 marks) Has commented on pooling of risk and the level of insurance premium paid with/without an opinion. Pooling of risk is the fortunate helping the unfortunate. Claims are paid from the pool. Premiums are charged according to risk. If the risk of a fire is high, the premium to be paid will be high. Insurers keep past records. If there are no past records, they cannot provide insurance cover.