Explain four reasons why governments might support business start-ups.

Mark scheme

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

1. [1] To reduce unemployment
2. [1] Explanation: new businesses create jobs and therefore help to reduce unemployment in the country / fewer welfare benefits to pay
3. [1] To increase competition
4. [1] Explanation: new businesses will provide more choice for consumers and therefore will provide more competition for existing businesses / may keep prices lower and quality higher
5. [1] To provide/have a wider variety of goods and services available
6. [1] Explanation: there will be a wider choice for consumers
7. [1] To increase output / improve standard of living
8. [1] Explanation: new businesses will produce more goods and services in the economy/increase in GDP
9. [1] To benefit society
10. [1] Explanation: new start-ups may support social enterprises and therefore provide benefits other than just creating jobs
11. [1] They may grow into larger businesses in the future
12. [1] Explanation: successful larger businesses started small, so it is worth supporting businesses to get started
13. [1] Earns taxation
14. [1] Explanation: the business will pay tax if profitable and this will be a source of revenue for the government which they can then use for providing public services.
15. [1] To motivate/encourage entrepreneurs
16. [1] Explanation: government support may reduce the risk of failure
17. [1] Market research: Able to identify the market for eating bread as being targeted at all age groups
18. [1] Market research: Market research shows that starting to produce cakes is likely to be successful as 70% of respondents want to buy cakes
19. [1] Market research: Use of local ingredients could be emphasised in advertising if MB changes production techniques and suppliers
20. [1] Resources: To be able to calculate how much start-up capital is needed by Yasin to buy the bakery equipment
21. [1] Resources: It is a starting point for Yasin to make the necessary purchases to get the bakery started
22. [1] Resources: helps him to more effectively plan for the opening of the bakery
23. [1] Resources: Helpful to identify the costs for Yasin to set up the bakery - to see if he needs a bank loan
24. [1] Justification (Market Research): Market research is the most important as this shows that the bakery has the demand for it to be successful. Without a demand for bread the business will fail. However, a lack of experience may mean the list is not accurate or complete and Yasin may need a lot more capital than he thinks.
25. [1] Justification (Resources): Resources is the most important as this helped Yasin to plan what items of equipment are required for the bakery and how much all these items will cost. This is important for Yasin to work out how much start-up capital is required and make sure he has sufficient finance to get started successfully or arrange to raise additional finance if necessary. However, the sample was small and therefore the results may not be accurate so Yasin may make bad decisions when starting the bakery.