Ella has just left college and wants to start up her own business. She has designed a new bicycle light with a safety feature not found in any rival products. Ella knows obtaining finance will be difficult. She plans to have the lights produced in another country. Each light will cost $8 to produce. Ella cannot decide whether to use price skimming. She said: 'I have received orders for 300 lights and I have not even started promoting them'. Ella wants to be a successful entrepreneur. Table 1: Information on possible promotion options for Ella's bicycle light. [Table 1] Option 1: Set up her own website Cost information: $500 for web page to show product specifications and contact details Other information: For extra $750 website would allow customers to order online Option 2: Advertise in specialist magazine Cost information: $300 for full page colour advertisement Other information: One of the most popular cycling magazines in the country.

Mark scheme

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

1. [2] Knowledge [2 × 1] – award 1 mark for each relevant characteristic
2. Points could include: risk taker, innovator, creative, self-confident, optimistic, hardworking, independent, effective communicator, leadership, initiative, self-motivating/determined, results driven, good at networking, multi-skilled
3. [2] Application: [2 × 1] award 1 mark for each relevant reason
4. Points might include: lower costs; access to materials; no local factory or capacity to make it; Fewer restrictions
5. [4] Knowledge [2 × 1] - award 1 mark for each relevant reason
6. Application [2 × 1] - award 1 mark for each explanation in context
7. Possible points might include: No business experience [k] of making lights [app]; Seen as higher risk OR don't trust her OR can't repay [k] as just left college [app]; Can offer no security [k]; May not have a business plan OR documentation to support request for finance [k]; Unproven product [k]
8. [6] Knowledge [2 × 1] award one mark for one advantage and one disadvantage
9. Application [2 × 1] award one mark for each relevant reference to this business
10. Analysis [2 × 1] award one mark for each relevant explanation
11. Points might include: Advantages: Recover costs quicker [k] as need to sell fewer than 300 [app] to pay for development [an]; Gives the image of a quality product [k] which can attract wealthy customers [an] to try out the new light [app]; Higher revenue per item[k]; Break even at a lower output [k]
12. Disadvantages: Put off some potential customers [k] leading to lower sales [an]; Only work in short term [k] as competitors could produce cheaper alternatives [an]
13. [6] Knowledge [1] – award 1 mark for identification of relevant points (s)
14. Application [1] – award 1 mark for relevant reference made to this business
15. Analysis [2] – award up to 2 marks for relevant development of point(s)
16. Evaluation [2] – justified decision made as to which method of promotion Ella should use
17. Points might include: Option 2 is cheaper [k] as is $200 less than option 1 [app] + [an]; Ella can't afford much advertising [k] as a new business [app] she can't afford a website [an]; Specialist magazine reaches the target market [k] for bicycle lights [app] therefore likely to sell more [an]; Website may not be required [k] already has an order for 300[app]