IGCSE Business Studies Paper-1: Specimen Questions with Answers 6 - 7 of 14

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Passage

Ravi Yadav lives in a city in country Z. The city has a big Indian population. When Ravi was looking for a business opportunity he identified a niche market in selling saris and similar clothes to Indian ladies. He imports the clothes from country X and sells them to retailers in his city.

Question 6 (2 of 4 Based on Passage)

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If the currency of country Z appreciated in value how would this affect the profitability of Ravi՚s business? Explain your answer.

Explanation

If the currency of the country Z that is where Ravi lives appreciated in the value than he can earn more profit as he has to pay less to buy the products and simultaneously he can sell the product at the same rate. For instance , if Ravi used to pay 100/- to purchase a product and he used to sell that product for 150/- his net profit would be 50/- but now as the currency has appreciated he now pay less say 60/- to purchase a product but still sells it for 150/- now his net profit is 90/-

Question 7 (3 of 4 Based on Passage)

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Ravi՚s business is that of a wholesaler. Why do you think that retailers in country Z don՚t buy their clothes directly from the suppliers?

Explanation

Wholesalers are the person who buys various goods or products from the suppliers in larger quantity and sells them to retailers. Suppliers usually sales good in larger amounts , they believe in dispatching goods to people who only take number of goods in larger amount and the retailers do not believe in bulk selling

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