Kemala makes high-quality beauty products. Demand for her best-selling hand cream is price inelastic. She advertises her products in specialist beauty magazines. Kemala is analysing her income statement. An extract is shown in Table 2.1. She said: 'When I started my business, I did not understand why cash is important'. Table 2.1 Extract from Kemala's income statement 2021 ($000) Revenue: 480 Gross profit: 192 Profit for the year: 72

Mark scheme

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

1. [2] Money coming in from selling a product over a given period of time
2. OR [2] Amount of money a business earns from the sale of its products
3. OR [2] Income of the business from the sale of goods or services
4. OR [2] Price × quantity sold
5. Partial definition e.g. income of the business [1]
6. Correct answer = 15% [2]
7. Correct method but incorrect answer e.g. profit / revenue x 100 [1] OR 72 / 480 × 100 [1]
8. If correct answer given with no working shown award 2 marks.
9. Award 1 mark for each relevant reason (max 2).
10. Award 1 mark for each relevant reference to this business (max 2).
11. Pay wages/employees [k] who make the beauty products [app]
12. Pay suppliers/trade payables [k] to maintain high-quality [app]
13. Pay expenses/heating/rent/advertising [k] such as in specialist magazines [app]
14. Repay (short term) debts [k]
15. For use in an emergency [k]
16. Other appropriate responses should also be credited.
17. Award 1 mark for identification of each relevant point (max 2).
18. Award 1 mark for each relevant reference to this business (max 2).
19. Award 1 mark for each relevant explanation (max 2).
20. Unique/no (close) substitutes [k] as its high-quality [app] so an increase in price is likely to result in a lower percentage change in demand [an]
21. Considered a necessity/need [k] so customers likely to remain brand loyal (even if the price increases) [an] for the hand cream [app]
22. Low proportion of income spent on product [k] so customers would still buy (if the price increased) [an] increasing revenue above $480000 [app]
23. Other appropriate responses should also be credited.
24. Award up to 2 marks for identification of relevant points .
25. Award up to 2 marks for relevant development of points.
26. Award up to 2 marks for a justified decision as to whether advertising in specialist magazines is the best way for a business to promote high-quality products.
27. Attract specific customers/target market [k] increasing sales [an]
28. Able to use colour/pictures [k] which can help attract attention [an]
29. Can keep for future reference [k]
30. Magazines are often only published once a week/month [k]
31. Not everyone reads/buys specialist magazines [k]
32. Social media/Facebook/Twitter [k] as large potential market / cover wide area / seen by many people [an]
33. Newspapers [k] not everyone reads them [an] so can restrict target market/ lead to fewer sales [an]
34. Leaflets [k] but people may throw them away/seen as litter [an]
35. Other appropriate responses should also be credited.
36. Justification might include: A disadvantage of specialist magazines is that it is likely to be seen by a small number of people [k] which can reduce its potential sales [an]. I think social media [k] is a better option as customers can still be targeted but also it allows the business to cover many people [an]. This would allow them to build a bigger customer base [eval] to maximise potential revenue [eval].