A-level Business Studies — essay 01, 13B Feedback

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Class Question Level Analysis (QLA)

13B

🍎 Teacher Next Steps & Interventions

Question Breakdown

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Question	Topic / Title	Max Marks	Class Avg	Performance %	RAG Rating

Examiner's Report & Best Practice

essay 01 • 9 marks

1. General Performance Overview

Overall: 27 essays were marked for 13B. The class average was 4.2/9 (47%).

Level distribution: Level 3 (7–9): 4 | Level 2 (4–6): 15 | Level 1 (1–3): 6 | 0 marks: 2
Average length: about 150 words.
Not attempted or unreadable: 2 script(s) scored 0 with little or no writing. Teachers: check these scans (B02, B06).

2. The Essay

"Read the information about Daihatsu. Analyse the likely effects of a significant increase in interest rates on the profits of car manufacturers." (9 Marks)

✅ What Went Well

Application: 19 of 25 essays (76%) used the case at least twice – for example that cars are bought on credit, or the 78% capacity utilisation.
Demand side: 19 essays (76%) developed a chain from higher interest rates through demand or sales.
Reaching Level 3: 4 essays reached Level 3 by building at least two developed chains of analysis applied to the case.
Range: 8 essays (32%) developed two or more separate chains of analysis.

⚠️ Areas for Improvement

Analysis: 6 essays (24%) had no developed chain of analysis, which limits them to Level 1. A point needs linked steps (this leads to… which means…) that end in the effect on profit.
The cost side: only 6 of 25 essays (24%) developed a chain through the manufacturer's own costs (unit costs, capacity utilisation, its own borrowing), and 6 covered both costs and demand. Profit depends on costs as well as revenue, so the strongest essays cover both.
Length: 6 essays were under 120 words (class average 150). The Level 3 essays averaged about 204 words.
Accuracy: 6 piece(s) of business knowledge were incorrect. Points marked wrong:
- Inelastic demand – Cars generally have price elastic demand, and Daihatsu makes small cars, not luxury cars for high-income earners.
- YED measures responsiveness to income, not interest rates – YED is incorrectly applied to changes in interest rates.
- Daihatsu gets the car on credit. – Daihatsu is the manufacturer producing the cars, not the consumer buying them on credit.
- Capacity utilisation – Lower demand leads to lower capacity utilisation, not higher.
- Income elasticity of demand – Luxury goods have positive income elasticity, not negative
- Variable costs increase when sales volume falls. – Average fixed costs increase when volume falls, not variable costs.

3. Exemplar: the highest-scoring essay (9/9, Level 3)

🏆 What a Level 3 essay looks like

Anonymised. Hover over the highlighted text to see the examiner's comments.

A significant increse in interest rates raises raises the cost of borrowing for consumersKnowledge: Higher interest rates increase borrowing costs, which directly reduces the demand for high-value items like carsApplication: Cars as high-value items. Because vechiles are often payed on creditApplication: Cars bought on credit, higher interest rates make monthly financing payments more expensive, causing many potential buyers to delay purcha purchases or by a cheaper car.Analysis: Higher interest rates increase monthly payments, leading to delayed purchases or cheaper alternatives This will cause a car manufacturer will experience a sharp decline in sales volume.Analysis: Delayed purchases lead to a sharp decline in sales volume this reduction in revenue, combined with the high fixed cost of manufacturing facilitys, will heavily decrease overall profits.Analysis: Lower sales volume reduces revenue, which against high fixed costs, decreases overall profits

Furthermore, higher interest rate increas the cost of capital for the manufactur themselfsKnowledge: Interest rates affect the cost of capital for businesses decreasing profit margins.Analysis: Higher cost of capital decreases profit margins from both the cost and financing. for manufactures that directly provide credit options to consumersApplication: Manufacturers providing credit options, higher interest rat can lead to increase default the cost of financing which will further discourage buyers.Analysis: Higher interest rates increase default risk and cost of financing, further discouraging buyers Additionally in an auto industy already struggling from low capacity utilisation of 78% globallyApplication: 78% global capacity utilisation a drop in demand will spark fierce price cutting as firms attemp to clear excess inventoryAnalysis: Drop in demand exacerbates low capacity utilisation, leading to price cutting to clear inventory therefore the combination of discounted prices and increase in cost of borrowing costs for investment in new technology like machinery and reduced sales will severly compte decrease the profit marginsAnalysis: Discounted prices, higher borrowing costs, and reduced sales combine to severely decrease profit margins for DaihatsuApplication: Reference to Daihatsu and other car manufacturing

Its developed chains of analysis:

Higher interest rates -> expensive monthly payments -> delay purchases -> decline in sales volume -> reduction in revenue -> combined with high fixed costs -> decrease overall profits.
Higher interest rate -> increases cost of capital for manufacturers -> decreases profit margins.
Drop in demand + low capacity utilisation -> price cutting to clear excess inventory -> discounted prices + higher borrowing costs + reduced sales -> severely decrease profit margins.

Class Question Level Analysis (QLA)

13B

🍎 Teacher Next Steps & Interventions

Question Breakdown

Click on column headers to sort the table.

Question	Topic / Title	Max Marks	Class Avg	Performance %	RAG Rating

Examiner's Report & Best Practice

essay 01 • 9 marks

1. General Performance Overview

Overall: 27 essays were marked for 13B. The class average was 4.2/9 (47%).

Level distribution: Level 3 (7–9): 4 | Level 2 (4–6): 15 | Level 1 (1–3): 6 | 0 marks: 2
Average length: about 150 words.
Not attempted or unreadable: 2 script(s) scored 0 with little or no writing. Teachers: check these scans (B02, B06).

2. The Essay

"Read the information about Daihatsu. Analyse the likely effects of a significant increase in interest rates on the profits of car manufacturers." (9 Marks)

✅ What Went Well

Application: 19 of 25 essays (76%) used the case at least twice – for example that cars are bought on credit, or the 78% capacity utilisation.
Demand side: 19 essays (76%) developed a chain from higher interest rates through demand or sales.
Reaching Level 3: 4 essays reached Level 3 by building at least two developed chains of analysis applied to the case.
Range: 8 essays (32%) developed two or more separate chains of analysis.

⚠️ Areas for Improvement

Analysis: 6 essays (24%) had no developed chain of analysis, which limits them to Level 1. A point needs linked steps (this leads to… which means…) that end in the effect on profit.
The cost side: only 6 of 25 essays (24%) developed a chain through the manufacturer's own costs (unit costs, capacity utilisation, its own borrowing), and 6 covered both costs and demand. Profit depends on costs as well as revenue, so the strongest essays cover both.
Length: 6 essays were under 120 words (class average 150). The Level 3 essays averaged about 204 words.
Accuracy: 6 piece(s) of business knowledge were incorrect. Points marked wrong:
- Inelastic demand – Cars generally have price elastic demand, and Daihatsu makes small cars, not luxury cars for high-income earners.
- YED measures responsiveness to income, not interest rates – YED is incorrectly applied to changes in interest rates.
- Daihatsu gets the car on credit. – Daihatsu is the manufacturer producing the cars, not the consumer buying them on credit.
- Capacity utilisation – Lower demand leads to lower capacity utilisation, not higher.
- Income elasticity of demand – Luxury goods have positive income elasticity, not negative
- Variable costs increase when sales volume falls. – Average fixed costs increase when volume falls, not variable costs.

3. Exemplar: the highest-scoring essay (9/9, Level 3)

🏆 What a Level 3 essay looks like

Anonymised. Hover over the highlighted text to see the examiner's comments.

A significant increse in interest rates raises raises the cost of borrowing for consumersKnowledge: Higher interest rates increase borrowing costs, which directly reduces the demand for high-value items like carsApplication: Cars as high-value items. Because vechiles are often payed on creditApplication: Cars bought on credit, higher interest rates make monthly financing payments more expensive, causing many potential buyers to delay purcha purchases or by a cheaper car.Analysis: Higher interest rates increase monthly payments, leading to delayed purchases or cheaper alternatives This will cause a car manufacturer will experience a sharp decline in sales volume.Analysis: Delayed purchases lead to a sharp decline in sales volume this reduction in revenue, combined with the high fixed cost of manufacturing facilitys, will heavily decrease overall profits.Analysis: Lower sales volume reduces revenue, which against high fixed costs, decreases overall profits

Furthermore, higher interest rate increas the cost of capital for the manufactur themselfsKnowledge: Interest rates affect the cost of capital for businesses decreasing profit margins.Analysis: Higher cost of capital decreases profit margins from both the cost and financing. for manufactures that directly provide credit options to consumersApplication: Manufacturers providing credit options, higher interest rat can lead to increase default the cost of financing which will further discourage buyers.Analysis: Higher interest rates increase default risk and cost of financing, further discouraging buyers Additionally in an auto industy already struggling from low capacity utilisation of 78% globallyApplication: 78% global capacity utilisation a drop in demand will spark fierce price cutting as firms attemp to clear excess inventoryAnalysis: Drop in demand exacerbates low capacity utilisation, leading to price cutting to clear inventory therefore the combination of discounted prices and increase in cost of borrowing costs for investment in new technology like machinery and reduced sales will severly compte decrease the profit marginsAnalysis: Discounted prices, higher borrowing costs, and reduced sales combine to severely decrease profit margins for DaihatsuApplication: Reference to Daihatsu and other car manufacturing

Its developed chains of analysis:

Higher interest rates -> expensive monthly payments -> delay purchases -> decline in sales volume -> reduction in revenue -> combined with high fixed costs -> decrease overall profits.
Higher interest rate -> increases cost of capital for manufacturers -> decreases profit margins.
Drop in demand + low capacity utilisation -> price cutting to clear excess inventory -> discounted prices + higher borrowing costs + reduced sales -> severely decrease profit margins.

Read the information about Daihatsu. Analyse the likely effects of a significant increase in interest rates on the profits of car manufacturers. (9 marks)

Source: Daihatsu

Daihatsu is a Japanese manufacturer of small cars. Its customers are now able to customise their vehicles with car panels that they design for themselves online. Until recently customising cars was expensive because it required skilled craftsmen to produce individual parts.

With 3-D printing, panels can be produced quickly and cheaply. Customers ordering a Daihatsu car from their local dealership can design their own panels for the sides of the car to create exactly the look that they want. Offering more customisation is one way that car manufacturers are trying to gain a competitive advantage in a fiercely competitive environment.

Cars are a high value item for consumers and are usually bought on credit; the finance to buy the car is often provided by the manufacturer. In 2016 over 74 million cars were sold worldwide. This represents a global capacity utilisation in the car industry of only 78%. Some commentators predict global capacity utilisation in the industry will fall in the next few years and that many car manufacturers will respond to this situation by price cutting.

Model Answer (9 marks)

KnowledgeApplication to the caseAnalysisNot creditedWrong

Green: knowledge. Blue: the case applied. Purple: the chains of analysis that carry each point through to profit.

A significant rise in interest rates increases the cost of borrowingEXAMINER: Knowledge 1: accurate business theory, used to answer the question.. This matters because cars are a high value item and are usually bought on creditEXAMINER: Application 1: uses the Daihatsu case to support the point., so customers' monthly repayments rise, the total cost of the car goes up and fewer people can afford to buy, which reduces demand and sales revenueEXAMINER: Analysis 1: a developed chain of reasoning, step by step, ending in the effect on profit.. As the finance is often provided by the manufacturerEXAMINER: Application 2: uses the Daihatsu case to support the point., it may also have to offer cheaper finance deals to protect sales, which cuts its margin either way.

Lower demand also raises costs. Capacity utilisation was only 78% in 2016EXAMINER: Application 3: uses the Daihatsu case to support the point. and is expected to fall. If fewer cars are sold, factories run further below capacity, so fixed costs are spread over fewer cars, the cost per unit rises and the profit margin on each car fallsEXAMINER: Analysis 2: a developed chain of reasoning, step by step, ending in the effect on profit.. Because the market is fiercely competitive and many manufacturers are expected to cut pricesEXAMINER: Application 4: uses the Daihatsu case to support the point., firms cannot pass these higher unit costs on to customers, so profit is squeezed from both sides.

Higher rates raise manufacturers' own costs too. Car making is capital intensive, and a highly geared firm pays more interest on its loansEXAMINER: Knowledge 2: accurate business theory, used to answer the question., so its finance costs rise and net profit fallsEXAMINER: Analysis 3: a developed chain of reasoning, step by step, ending in the effect on profit.. Firms may also postpone investment because borrowing is more expensiveEXAMINER: Knowledge 3: accurate business theory, used to answer the question., for example in 3-D printing for customised panelsEXAMINER: Application 5: uses the Daihatsu case to support the point., which weakens their competitive advantage and reduces sales and profit in the longer runEXAMINER: Analysis 4: a developed chain of reasoning, step by step, ending in the effect on profit..

However, the effect depends on the manufacturer. Daihatsu makes small carsEXAMINER: Application 6: uses the Daihatsu case to support the point., and when consumers' disposable income falls, demand can shift towards cheaper goodsEXAMINER: Knowledge 4: accurate business theory, used to answer the question., so some buyers may trade down to a small car, meaning Daihatsu loses fewer sales than premium brands and its profits fall by lessEXAMINER: Analysis 5: a developed chain of reasoning, step by step, ending in the effect on profit..

Instead of writing: Interest rates going up is bad for car companies so they make less profit.EXAMINER: States the result but gives no chain of reasoning and no link to the Daihatsu case.

Mark Scheme (9 Marks)

Level	Marks	Descriptor
Level 3	7–9	A good response overall that focuses on many of the demands of the question. Demonstrates a depth and range of knowledge and understanding of the issues in the question, and analysis which is well developed and applied effectively to the context.
Level 2	4–6	A reasonable response overall that focuses on some of the demands of the question. Demonstrates a limited knowledge and understanding of a range of issues, or a good knowledge and understanding of relatively few issues, and analysis which is developed and applied to the context.
Level 1	1–3	A limited response overall with little focus on the demands of the question. Demonstrates a limited range and depth of knowledge and understanding, and analysis with little development and mainly descriptive application to the context.
Level 0	0	No rewardable material.

Features of a good answer:

Knowledge – accurate business theory, e.g. cost of borrowing, demand, capacity utilisation, unit costs, gearing.
Application – use the Daihatsu case: cars bought on credit, high value, 78% capacity utilisation, price cutting, 3-D printing.
Analysis – developed chains of reasoning (this leads to… which means…) that end in the effect on profit.
Answer the whole question – cover costs as well as demand, and keep coming back to profit.

The focus of the question: The effects of a significant increase in interest rates on car manufacturers, and how and why this could affect their profit (for example through the impact on costs and/or demand).

Indicative content may include:

Higher interest rates raise the cost of borrowing. Cars are usually bought on credit, so repayments and the overall cost of the car rise; fewer customers can afford the interest, so demand, sales revenue and potentially profit fall.
Lower demand adds to excess capacity in the industry. Lower capacity utilisation raises the cost per unit and reduces the profit margin on each car.
Higher rates encourage saving rather than spending, especially on cars; cars may be produced but left unsold until supply is adjusted, so profit falls through unsold or discounted stock.
Manufacturers' own borrowing costs rise, cutting profit, especially for highly geared firms; the car industry needs heavy, regular investment in R&D, plant, equipment and training.
Higher borrowing costs may lead firms to postpone investment or modernisation, raising production costs over time and reducing profit.