Growing economies — Edexcel A-Level Business
Test yourself on Growing economies with PEARSON EDEXCEL A-Level practice questions.
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Growing economies explained
A country's rate of expansion is the annual percentage change in real gross domestic product, and the contrast a case study leans on is a mature economy adding roughly one to two per cent a year while India, Vietnam or Nigeria add five per cent or more.
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Managers use that gap to decide where the next factory, franchise or sales office goes. The trade-off is that rapid expansion arrives with currency swings, weaker contract enforcement, thin infrastructure and political risk, while the slow home market is predictable and already understood. Strong answers notice the base effect: a small percentage of a very large developed market can add more spending in pounds than a spectacular percentage in a poor one, so the rate has to be read alongside market size and income per head.
b) Growing economic power of countries within Asia, Africa and other parts of the world
Economic weight is shifting towards Asia and Africa, and a business answer has to treat that shift as a market and a threat at the same time. On one side sit hundreds of millions of new middle income consumers, cheap manufacturing capacity and a young workforce, which is why Unilever now earns a majority of its turnover outside Europe and North America. On the other side sit the competitors those economies produce, such as Huawei, Tata and Shein, which arrive in Western markets with scale already built. The trade-off for a British firm is between the sales gained by entering early and the cost of learning an unfamiliar market with different distribution, regulation and taste. Evaluation usually turns on whether a cost advantage lasts, since Chinese wages have risen far enough to push assembly on to Vietnam and Bangladesh.
c) Implications of economic growth for individuals and businesses: trade opportunities for businesses; employment patterns
Rising national income changes both what people buy and what they do for a living, and marks sit in both halves. On the demand side, income elasticity of demand, the percentage change in quantity demanded divided by the percentage change in income, decides who gains: staples carry a low positive value, cars, holidays and branded goods carry a value above one and grow faster than the economy, and inferior goods such as value ranges lose sales. On the supply side, workers move out of agriculture into manufacturing and then services, cities swell, participation rises and skill shortages appear, which pushes up wages and labour turnover. For a firm the effects point both ways, with new export customers and a deeper labour pool on one side and higher pay, higher expectations and stronger local rivals on the other.
d) Indicators of growth: Gross Domestic Product (GDP) per capita; literacy; health; Human Development Index (HDI)
These are the screening measures a firm uses before committing to a country. Output per head is national output divided by population, usually shown in dollars and adjusted for purchasing power so that local price levels are comparable, and it proxies what a typical customer can afford. The wider index blends life expectancy, schooling and income into one figure running from zero to one, so it captures whether that spending power reaches ordinary households. The share of adults who can read tells a manager whether print advertising, written instructions and technical training will work, while measures of illness and life expectancy predict absence and productivity. All of them are averages, which is their weakness: a country can post a respectable figure while the customers a premium brand needs sit in two cities and nowhere else.
Your focus
- a) Growth rate of the UK economy compared to emerging economies
- b) Growing economic power of countries within Asia, Africa and other parts of the world
- c) Implications of economic growth for individuals and businesses: trade opportunities for businesses; employment patterns
Show all 4 objectives
- d) Indicators of growth: Gross Domestic Product (GDP) per capita; literacy; health; Human Development Index (HDI)
Growing economies exam tips
Marking Points
- Quoting both figures from the extract and expressing the gap as a comparison, for example that the emerging market is expanding three times as fast as the home market.
- Explaining the mechanism, so faster income growth is shown to raise demand for this product category rather than simply asserting a bigger market.
- Applying the difference to a stated decision, such as whether to open stores abroad or defend share at home, and naming the resource constraint.
- Weighing absolute market size against percentage change, recognising that a slow mature economy may still add more spending in cash terms.
- Qualifying the comparison with the risks the headline figure hides, such as exchange rate movement, inflation and unequal income distribution.
- Naming a specific country or region from the extract and the specific opportunity it creates for this firm, such as a rising middle income group buying branded goods.
- Recognising the same shift as a competitive threat, naming emerging market rivals that are entering the firm’s home market.
- Linking the shift to a functional decision, for example relocating production, sourcing components or opening a regional sales office.
- Supporting the claim about spending power with demographic or income evidence rather than the bare assertion that a country is developing.
- Judging how long any labour cost advantage will last, given wage inflation, currency movement and rising local demand.
- Naming income elasticity of demand and classifying the product as a luxury, a normal good or an inferior good before predicting the effect on sales.
- Describing a specific shift in the type of work available, such as movement into services or urbanisation, and connecting it to the firm’s recruitment or labour cost.
- Separating the effect on individuals, such as higher disposable income, from the effect on the business, such as new export demand or a higher wage bill.
- Quantifying the opportunity where the extract allows, for example applying an income elasticity value to a forecast rise in average earnings.
- Reaching a supported judgement on whether the demand gain outweighs the cost pressure for this particular firm.
- Defining output per head as national output divided by population, and saying what it implies about affordable price points for this firm.
- Naming the three components of the Human Development Index and explaining why a broader measure than output alone matters for market entry.
- Using literacy or health data to justify an operational decision, such as the training budget, the style of packaging or expected absence levels.
- Comparing two countries in the extract on more than one measure and reaching a ranked recommendation.
- Criticising these measures as averages that hide inequality, the informal economy and environmental damage.
Examiner Tips
- 💡This usually opens a longer question on overseas expansion, so use it as evidence inside an assess or evaluate answer rather than as an answer on its own.
- 💡State the gap explicitly, in percentage points or as a multiple, because examiners reward quantitative comparison drawn from the extract.
- 💡Keep one current pair of figures in mind for context, but always argue from the numbers printed in the case study.
- 💡This is usually the background to a question on where to expand or where to produce, so convert it into a reason for or against the option named in the case.
- 💡One brief real example is enough; examiners reward the applied point, not a list of countries.
- 💡Balance the opportunity against the threat from emerging market competitors, because a one sided answer caps the evaluation mark.
- 💡Expect a short calculate or explain question on income elasticity attached to a longer analyse question, so learn it as a ratio of percentage changes.
- 💡Say which way the effect runs for this specific product, since the same rise in incomes helps one firm and hurts another.
- 💡In an evaluate answer, weigh the extra demand against the extra wage and input cost, then say which is larger here.
- 💡A short calculate question can ask for output per head, so divide output by population and state the units as dollars per person.
- 💡In an assess question, use two measures that disagree and explain the disagreement, because that contrast is where evaluation marks sit.
- 💡Finish with what these measures cannot show, such as the distribution of income or the size of the target segment.
Common Mistakes
- Treating a fast rate of expansion as proof of a high income level, when a country growing quickly may still have very low spending per head.
- Repeating the percentages from the extract with no consequence for the business, which earns knowledge credit only.
- Assuming expansion continues in a straight line, when emerging economies are more volatile and can slow sharply or devalue.
- Confusing real and nominal figures, so inflation is counted as extra demand for the firm.
- Dismissing these countries as too poor to be markets, which ignores the size of urban middle income groups in cities such as Lagos, Mumbai and Jakarta.
- Writing a general geography answer about Asia and Africa with no named business and no decision attached to it.
- Treating Africa as a single market, when regulation, language, currency and infrastructure differ sharply between Nigeria, Kenya and South Africa.
- Assuming low wages automatically mean low total cost, ignoring logistics, quality failures, tariffs and management time.
- Assuming every business gains, when producers of inferior goods such as budget ranges and discount travel can lose sales as incomes rise.
- Confusing income elasticity with price elasticity, so the calculation uses a price change when the question supplies an income change.
- Writing about employment only as unemployment falling, without describing the change in the structure of work.
- Ignoring that rising incomes also raise the firm’s own wages and the prices its local suppliers charge.
- Quoting total national output rather than output per head, so a populous but poor country looks like a wealthy market.
- Treating the Human Development Index as a measure of how easy a country is to trade in, when it says nothing about tariffs, corruption or infrastructure.
- Listing the measures as definitions without applying any of them to a location or entry decision.
- Ignoring the purchasing power adjustment, so a low dollar figure is read as no market at all when local prices are also low.