O-LevelCommerceRetail trade7100/22 · Oct/Nov 2017 · Q520 Marks

After seeing a newspaper advertisement, Maryam has decided to buy a television costing $700 from a large retail store. She has a 20% deposit and will have to borrow the remaining 80%. The television is guaranteed for two years.

(a)State two disadvantages of using newspaper advertising.[2]
(b)Explain two reasons why many customers would prefer to shop for a television at a large-scale retailer rather than a small-scale retailer.[4]
(c)What is meant by the term guarantee?[1]
(d)(i)The same retail store is selling a computer to Fabrice for $1200. Fig. 3 shows three possible purchase options for this computer. Retail store | Online seller | Hire purchase $1200 | $1120 | $300 deposit 5% cash discount | $15 delivery charge | 20 instalments of $75 Fig. 3 Use Fig. 3 to help you answer the following questions. If making his purchase decision on price alone, would Fabrice purchase the computer from the retail store or the online seller? Use numerical data to help you to justify your answer.[4]
(d)(ii)Explain in what circumstances Fabrice would choose the hire purchase option.[3]
(e)Discuss whether or not the retail store should use informative and persuasive advertising to increase its sales of computers. Give reasons for your opinion.[6]

This question uses a diagram from the original paper, which isn't shown here. Open the full paper from the past papers archive to see it.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2017). The mark or mark type is shown in brackets.

[1] Less people buy newspapers nowadays
[1] Advertisements do not stand out from others on a page / not eye-catching / not attractive
[1] Not suitable for the illiterate
[1] No movement / no sound
[1] Many advertisements printed in black / no colour
[1] Has a short life span
[1] Many people to do not buy a newspaper / access other media instead.
[1] Lower prices
[1] since large-scale retailer makes use of special offers / loss leaders
[1] as they can afford to buy in bulk
[1] There will be a larger range of televisions offered
[1] providing greater choice
[1] Car parking can be offered
[1] so it is possible to carry television home
[1] More likely to offer home delivery / after-sales service
[1] no need to use own transport
[1] they may install
[1] A guarantee is a promise that, if a good/TV is not of a certain standard / does not work properly, the original price paid for the good/TV will be refunded or will be repaired.
[1] That the television will work satisfactorily for the given period of time / two years.
[1] Price at retail store is: $1200 - 5% of $1200 = $1200 - $60 = $1140
[1] Price at online seller is: $1120 + $15 = $1135
[1] Difference = $5
[1] Online is cheaper / Fabrice should buy online as long as there is no delivery charge
[1] Cost of hire purchase option: Deposit = $300, 20 × $75 = $1500, Total = $1800.
[1] Fabrice may want to use the money elsewhere and may not have the cash to pay now as the computer is expensive and would prefer to pay back in smaller amounts / instalments.
[1] If he wants to use the computer while paying for it over a longer period of time.
[1] Informative advertising provides factual information.
[1] It informs the consumer of what is available and may include some features of the product or service.
[1] Persuasive advertising attempts to influence the consumer and persuade them to buy a particular good or service.
[1] The retail store is trying to sell computers which are widely available and are a very technical product.
[1] The technically-wise consumer could react to informative advertising about the technical specifications of the computer.
[1] However the less technical consumer may not understand the specifications and only be influenced by persuasive advertising, such as price comparisons or better obvious features such as a better screen picture.
[1] The store may decide which market it is aiming at, but to attract the whole market, informative and persuasive advertising must be used.