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Commerce IGCSE June 2013

1. (a) trade
(b) primary
(c) banks?
(d) imports
2. (a) Private sector includes businesses that produce goods and services according to needs and desires of customers for a
profit. The fast-food chain McDonalds is a part of the private sector since it is privately owned and produces fast-food for a
profit.
(b) public sector produces goods that are difficult to make a profit in its production without collecting money from
members of society, or goods that are essential to communities. Organizations are funded by governments, ie by taxpayers
money. The provision of national defense is an example.
3. Return on capital = 60000 = 300000 = 360000
4. goods are protected from rough conditions during the process of transportation, such as seawater and humid air.
- time and money can be saved since only one lifting action is required to load the goods onto ships/vehicles

5. customers can transfer money within banks, ie within accounts of different banks
Money can be transferred to many accounts at the same time ****
6. colour black can be used to show luxury of the car
Well-taken images showing speed can be shown to attract attention to the speed of the car as a form of visual appeal
7. (i) long-term
(ii) short-term
(iii) short-term
(iv) short-term
8. Airmail
9. 1. They are a commonly accepted medium of exchange with guaranteed value
2. They can be used immediately **
10. They are to inform buyers of the expected delivery date and relevant information of goods being delivered
They are to inform and correct mistakes made by sellers with regards to the over-charged price
11. It can have its own flexibility in using transport within limitations of fixed schedules.
It can provide tailor-made delivery service to customers
It can save operation costs in hiring/renting vehicles for transport.
12. The volume of trade changes constantly, affecting the value of trade among countries
Inflation/deflation may occur in local economies
13. In home trade, sellers do not have to pay custom duties (import/export taxes), while sellers have to pay for various taxes
when engaging in international trade. Sellers also do not have to deal with customs documents and procedures that are
highly complicated, and directly transport goods to wholesalers or retailers upon production.
14. To attract those who may not afford to pay at once to pay less for a longer period of time without interest/ cost of
extended payment.
(b) Monthly Repayment : 4200x0.8 /24 = 140 pounds
(c) the bank may take into the customers occupational status. If customer receives steady and sufficient income per month,
there is a high chance he will be able to pay up, but for those with no job or very low income, they may be unable to pay on
a monthly basis.
15. (a) total = 350000/1000 = 72000/1000 x5 = 710
(b) The risk insured against in the insurance policy may be more likely to happen than the others, eg stock is less safe
compared to goods in warehouses.
(c) insurance brokers act as the middlemen. They give customers advice and information on insurance policies offered by
different companies , and when customers have chosen, they help arrange and set up the insurance policy with the
customers and insurance company involved. The brokers bring together insurance companies and clients in return for a
commission.
(d) The goods sold (furniture) are very large in size and cannot be all stored in the store. However, some goods may be in
high demand by retailers and the wholesaler needs to keep more pieces of the same furniture to satisfy customers
demands, which can be done by storing stock in a warehouse and deliver to customers after they have seen the item on
display. This prevents shortage of the furniture they sale, while makes the price unstable. They may also need to keep stocks
to cope with seasonal demands, for instance, there may be a particular period time, eg Christmas shopping season, when
products are in very high demand. Stocking up goods in a warehouse helps cope with the sudden surges in demand by
ensuring products are in stock.
(e) Wholesalers are responsible for breaking bulk in the retailing chain they purchase goods in bulk from manufacturers,
and sell them in smaller quantities to individual retailers. They send out salespersons to collect information from retailers
on the products and respective quantites they need, and deliver the goods to retailers. They earn money by a small margin
between the input prices of goods, and output prices to retailers. However, since wholesalers mainly concentrate on storing
and transporting goods, they do not have enough outlets to make sure the big amount of goods they purchase are sold,
they also do not have connections with customers that purchase them, or the brand name that some retailers have which
attracts customers. Furthermore, if they operate in retailing business, since they can offer lower prices than retailers,
retailers are driven out of business, and wholesalers lose their main source of income from breaking bulk. Lastly, employees
may not have specialized skills in retailing and the company overall is inexperienced in advancing into the next stage of
trade.
16. details of the company, price offered for each stock of shares, contact information of the related department of the
company, Minimum no of stocks required per purchase.
(b) it means the company is a legal entity and has limited liability. Shareholders or owners are not required to use personal
assets to pay off debts when the company goes bankrupt, and their losses are limited to their capital investment.
(c) They will be put up advertisements in newspapers or other forms of media. More details will be given about the past
and future plans of the company through publications or promotional campaigns by senior management. Banks will also
given information to prespective investors and customers
(d) They are legal entities so they have separate identities from their owners, and must be registered to prove their
existence. Owners have limited liability so when the company goes bankrupt, debts will be settled with the companys
accounts, which therefore must be provided to the registrar. Limited companies have to pay higher tax rates than other
businesses, and they are required to submit their accounts and operations . *******
(e) shareholders purchase stocks as a form of investment. When the company gets a profit, they gain in terms of dividends,
but when the company has losses, they do not gain anything. If the company goes bankrupt, they lose the initial capital
investment they have put in. Shareholders therefore bear the risk of losses or collapse of company, since they may lose
their initial investment. Limited companies have separate management and ownership, especially public limited companies,
and shareholders are not deeply involved in the running of the company, but bear the risks of production and operational
decisions and the respective consequences. Their investment is therefore risky.
17. (a) (i) 1. The company can increase sales of its product by attract customers to purchase the products.
They can build up their brand name and create brand image .
(ii) It makes it easier for customers to remember the product, thus have a higher chance of knowing and purchasing them. It
also distinguishes the coffee from other brands offered by competitors, and creates a unique brand name/association to the
name.
(b) Firstly, it has a very large audience. A lot of people will see the commercial, and since coffee is drunk by nearly everyone,
a high proportion of target customers can be reached out to. Furthermore, visual and sound appeal can be used to
advertise coffee, and visual can help bring out the delicious image of the Kafe, and the choice of music can further make the
advertisement more memorable to audiences. The cost of advertisement per customer is low, since the number reached is
high for the cost of the TV ad. The company can also put commercial in between related programmes, such as those related
to cuisine to appeal to audiences who have a taste for delicious food and drinks.
Advantages:
- Consumers can know more about different brands of coffe in the market, and choose one according to their tastes with
more info
- Competition increases quality of coffee and may force down prices, since competitive advertising implies strong
competition in the product market
- Consumers also see a rise in quality of advertisments, and may find ads more memorable, appealing and
interesting/worth-watching
Disadvantages:
- Increasing no of adverts in a nuisance, for instance, interruptions to TV programmes
- Coffee producers may spend a lot on advertising and shift burden onto customers
- Coffee producers may focus on ads more than coffee themselves lower quality
- To prevail, they may add in false information or use exaggeration in adverts, which affects customers decision making