Five years ago Manisha started making cakes for celebrations, such as weddings and birthdays, from her home. Now she has a small shop and 3 employees. Product quality is important to her business. Manisha said: 'I have benefited from the economic boom but I did not expect demand to increase by 500% each year. Somehow I have managed to cope with higher interest rates and all the challenges of being a sole trader. The business is profitable at last but I have to work every day.' A friend has offered to become Manisha's business partner.

Mark scheme

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

1. [2] strong rise in level of economic activity OR Period of time when GDP rising rapidly
2. [1] economy doing well [high GDP] or rise in level of economic activity or GDP rising
3. [1] Low OR falling unemployment OR shortage of skilled workers
4. [1] Rising inflation
5. [1] High levels of disposable income
6. [1] Increased number of business start ups
7. [1] High levels of consumer confidence OR demand
8. [1] High levels of business confidence OR profits
9. [1] Price charged by Manisha
10. [1] Fashion and trends
11. [1] Consumer tastes and preferences
12. [1] Stage in economic cycle OR changes in economic factors e.g. interest rates, taxes
13. [1] Level of consumer income
14. [1] Actions of competitors e.g. new products or changes in prices
15. [1] Complementary goods
16. [1] Increase in population
17. [1] Level OR effectiveness of advertising
18. [1] Quality of product
19. [1] Increase in cost (of borrowing) OR expenses OR cash outflows [k]
20. [1] if used loan to purchase shop [app]
21. [1] Reduced demand for products OR consumers reduce spending [k]
22. [1] as can afford fewer cakes [app]
23. [1] Look to sell assets for cash to reduce existing loans [k]
24. [1] Workers may want a pay rise [k]
25. [1] May have to increase prices (to remain profitable) [k]
26. [1] Business less likely to expand OR reduce investment [k]
27. [1] so may struggle to meet the increase in demand [app]
28. [1] Helps maintain customer loyalty [k]
29. [1] which could lead to repeat purchases OR buy again and again OR keep buying [an]
30. [1] Increase or ensure sales [k]
31. [1] as if cake does not taste right [app]
32. [1] people will find alternatives [an]
33. [1] Poor quality damages reputation OR brand image [k]
34. [1] so sales may fall [an]
35. [1] No need to replace faulty products [k]
36. [1] which will help reduce costs [an]
37. [1] of ingredients [app]
38. [1] Charge/maintain high prices [k]
39. [1] for her cakes [app]
40. [1] which could improve her profit margin [an]
41. [1] Way to add value [k]
42. [1] To meet legal requirements OR poor quality could damage people's health [k]
43. [1] as it's a food product [app]
44. [1] To gain competitive advantage [k]
45. [1] To reduce complaints [k]
46. [1] Share workload OR responsibility [k]
47. [1] so does not have to work everyday [app]
48. [1] which could reduce her own stress OR allow her more free time [an]
49. [1] More ideas OR skills [k]
50. [1] from her friend [app]
51. [1] which could make the business more competitive [an]
52. [1] Extra source of finance [k]
53. [1] which is important as interest rates high [app]
54. [1] so less need to borrow money [an]
55. [1] Still has unlimited liability status OR liability for debts [k]
56. [1] as being a sole trader [app]
57. [1] but possible losses can be shared [an]
58. [1] Loss of some control [k]
59. [1] over type of cakes made [app]
60. [1] Risk of disagreements OR slow decision making [k]
61. [1] so less responsive to changes in customer demand [an]
62. [1] Have to share profits made [k]