Business Studies Multiple Choice Question – 10 August 2017

Business Studies

A small UK retailer sells china plates in the UK. Its main competitors are foreign firms. The value of the pound increases compared to the US$.

Which of the following would be the MOST LIKELY results of this change in the £/US$ exchange rate for the UK retailer?

Select ONE answer:

  1. The retailer’s UK sales will increase as the UK retailer’s products will seem cheaper
  2. His competitors plates will seem more expensive
  3. The businesses products will seem more expensive in comparison to the foreign imports
  4. The businesses sales will fall
  5. The business will be more competitive

A strong £ means lots of $ to the £. This means that £1 buys more foreign currency, e.g. £1 today buys $2 compared to £1 a month ago when it bought $1.50. Goods imported into the UK will be cheaper for consumers. An iPad might cost £300 instead of the price a month ago of £400. For businesses exporting to the US, a strong £ means their products will appear more expensive to US consumers, e.g. a Dyson vacuum goes up to $500 compared to $400 the month before. If a strong £ continues, exporters cannot sell products abroad and businesses in the UK cannot compete with cheap imports. What might be the financial impact for these businesses if this continues?
……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This is multiple choice question is suitable for Business Studies KS4 classes.

The answer is 3 – The cost of selling china plates at $50 per plate in the UK at an exchange rate of $2 to £1 is £25 for a foreign firm. The cost of selling china plates at $50 per plate in the UK at an exchange rate of $4 to £1 is £12.55 for a foreign firm, a price improvement of £12.5 for a foreign firm selling into the UK.

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Author: stuart001uk2014

Referral marketing, business, economics and accounting s​pecialist & corporate mentor

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