A bakery supplies bread to local cafés and also exports speciality crackers to Ireland. Its market research shows that customers are buying fewer premium sn...
Question 1 Report
A bakery supplies bread to local cafés and also exports speciality crackers to Ireland. Its market research shows that customers are buying fewer premium snacks because household bills have increased. At the same time, flour prices have risen and the pound has fallen against the euro.
(a) Identify one factor that has increased the bakery's production costs. [1]
(b) Which group of customers is most likely to reduce demand for premium snacks? [1]
(c) Explain one possible benefit to the bakery of a weaker pound when exporting crackers to Ireland. [2]
(d) What could the bakery do to maintain sales of its premium snack product? [1]
Answer Details
(a) Higher flour prices have increased the bakery’s production costs. [1]
(b) Customers with lower disposable income, or other price-sensitive customers, are most likely to reduce demand for premium snacks. [1]
(c) A weaker pound can make UK-made crackers cheaper when priced in euros for Irish customers. The crackers may become more competitive in Ireland, potentially increasing export sales. [2]
(d) The bakery could offer a promotion, a smaller pack, a loyalty discount, or improve the product’s differentiation. [1]
Examination reminder: A weaker domestic currency tends to help exporters because overseas buyers can obtain the product more cheaply in their currency.
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