VVA is a business based in country X. It manufactures school backpacks (bags). VVA uses retailers as its channel of distribution. The Managing Director knows there are many factors that can affect demand including the stage of the business cycle and how competitive the market is. VVA imports 45% of its raw materials. The Managing Director is worried that the introduction of import tariffs and import quotas, as well as an appreciation in country X's exchange rate, will affect VVA.

1. (a)Define 'import tariff'.[2]
2. (b)Identify two reasons why some markets can become more competitive. Reason 1: Reason 2:[2]
3. (c)State the four stages of the business cycle. 1: 2: 3: 4:[4]
4. (d)Explain one possible effect of the following changes on VVA when importing raw materials: Introduction of import quotas in country X: Explanation: Appreciation of country X's exchange rate: Explanation:[6]
5. (e)Do you think retailers are the best channel of distribution for a manufacturing business to use? Justify your answer.[6]