Cambridge IGCSE™

BUSINESS STUDIES 0450/12

Paper 1 Short Answer/Data Response February/March 2023
MARK SCHEME
Maximum Mark: 80

Published

This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of the
examination. It shows the basis on which Examiners were instructed to award marks. It does not indicate the
details of the discussions that took place at an Examiners’ meeting before marking began, which would have
considered the acceptability of alternative answers.

Mark schemes should be read in conjunction with the question paper and the Principal Examiner Report for
Teachers.

Cambridge International will not enter into discussions about these mark schemes.

Cambridge International is publishing the mark schemes for the February/March 2023 series for most
Cambridge IGCSE™, Cambridge International A and AS Level components and some Cambridge O Level
components.

This document consists of 20 printed pages.

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Generic Marking Principles

These general marking principles must be applied by all examiners when marking candidate answers. They should be applied alongside the
specific content of the mark scheme or generic level descriptors for a question. Each question paper and mark scheme will also comply with these
marking principles.

GENERIC MARKING PRINCIPLE 1:

Marks must be awarded in line with:

• the specific content of the mark scheme or the generic level descriptors for the question
• the specific skills defined in the mark scheme or in the generic level descriptors for the question
• the standard of response required by a candidate as exemplified by the standardisation scripts.

GENERIC MARKING PRINCIPLE 2:

Marks awarded are always whole marks (not half marks, or other fractions).

GENERIC MARKING PRINCIPLE 3:

Marks must be awarded positively:

• marks are awarded for correct/valid answers, as defined in the mark scheme. However, credit is given for valid answers which go beyond the
scope of the syllabus and mark scheme, referring to your Team Leader as appropriate
• marks are awarded when candidates clearly demonstrate what they know and can do
• marks are not deducted for errors
• marks are not deducted for omissions
• answers should only be judged on the quality of spelling, punctuation and grammar when these features are specifically assessed by the
question as indicated by the mark scheme. The meaning, however, should be unambiguous.

GENERIC MARKING PRINCIPLE 4:

Rules must be applied consistently, e.g. in situations where candidates have not followed instructions or in the application of generic level
descriptors.

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GENERIC MARKING PRINCIPLE 5:

Marks should be awarded using the full range of marks defined in the mark scheme for the question (however; the use of the full mark range may
be limited according to the quality of the candidate responses seen).

GENERIC MARKING PRINCIPLE 6:

Marks awarded are based solely on the requirements as defined in the mark scheme. Marks should not be awarded with grade thresholds or
grade descriptors in mind.

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Social Science-Specific Marking Principles
(for point-based marking)

1. Components using point-based marking:

• Point marking is often used to reward knowledge, understanding and application of skills. We give credit where the candidate’s answer
shows relevant knowledge, understanding and application of skills in answering the question. We do not give credit where the answer
shows confusion.

From this it follows that we:

a. DO credit answers which are worded differently from the mark scheme if they clearly convey the same meaning (unless the mark
scheme requires a specific term)
b. DO credit alternative answers/examples which are not written in the mark scheme if they are correct
c. DO credit answers where candidates give more than one correct answer in one prompt/numbered/scaffolded space where extended
writing is required rather than list-type answers. For example, questions that require n reasons (e.g. State two reasons …).
d. DO NOT credit answers simply for using a ‘key term’ unless that is all that is required. (Check for evidence it is understood and not used
wrongly.)
e. DO NOT credit answers which are obviously self-contradicting or trying to cover all possibilities
f. DO NOT give further credit for what is effectively repetition of a correct point already credited unless the language itself is being tested.
This applies equally to ‘mirror statements’ (i.e. polluted/not polluted).
g. DO NOT require spellings to be correct, unless this is part of the test. However spellings of syllabus terms must allow for clear and
unambiguous separation from other syllabus terms with which they may be confused (e.g. Corrasion/Corrosion)

2. Presentation of mark scheme:

• Slashes (/) or the word ‘or’ separate alternative ways of making the same point.
• Semi colons (;) bullet points (•) or figures in brackets (1) separate different points.
• Content in the answer column in brackets is for examiner information/context to clarify the marking but is not required to earn the mark
(except Accounting syllabuses where they indicate negative numbers).

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3. Calculation questions:
• The mark scheme will show the steps in the most likely correct method(s), the mark for each step, the correct answer(s) and the mark
for each answer
• If working/explanation is considered essential for full credit, this will be indicated in the question paper and in the mark scheme. In all
other instances, the correct answer to a calculation should be given full credit, even if no supporting working is shown.
• Where the candidate uses a valid method which is not covered by the mark scheme, award equivalent marks for reaching equivalent
stages.
• Where an answer makes use of a candidate’s own incorrect figure from previous working, the ‘own figure rule’ applies: full marks will be
given if a correct and complete method is used. Further guidance will be included in the mark scheme where necessary and any
exceptions to this general principle will be noted.

4. Annotation:
• For point marking, ticks can be used to indicate correct answers and crosses can be used to indicate wrong answers. There is no direct
relationship between ticks and marks. Ticks have no defined meaning for levels of response marking.
• For levels of response marking, the level awarded should be annotated on the script.
• Other annotations will be used by examiners as agreed during standardisation, and the meaning will be understood by all examiners
who marked that paper.

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0450/7115/0986 Business Studies – Paper 1 Annotations

Annotation Description Use

Tick Tick Indicates a point which is relevant and rewardable.

X Cross Indicates a point which is inaccurate/irrelevant and not rewardable.

BOD Benefit of doubt Used when the benefit of the doubt is given in order to reward a response.

TV Too vague Used when parts of the answer are considered to be too vague.

REP Repetition Indicates where content has been repeated.

NAQ Not answered Used when the answer or parts of the answer are not answering the question asked.
question

K Knowledge Indicates knowledge and understanding of the concepts and issues relating to the question.

APP Application Indicates appropriate reference to the information in the stem.

AN Analysis Indicates where the answer has demonstrated analysis.

EVAL Evaluation Indicates where the answer has demonstrated evaluation (part (e) questions only).

OFR Own figure rule If a mistake is made in a calculation, and the incorrect figure that results from the mistake is used for
subsequent calculations.

SEEN Noted but no Indicates that content has been recognised but not rewarded.
credit given

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Question Answer Marks Notes

1(a) Define ‘inflation’. 2 For both marks must have reference to increase
in prices [1] and the time element [+1]. Time is
Award 2 marks for a full definition. Award 1 mark for a partial definition. +1 only.

An increase in the general price level of goods and services over time
[2]

Partial definition e.g. an increase in the price of goods/services [1]

1(b) Identify two ways technology could change production methods. 2 Only award the first two responses given.

Award 1 mark for each relevant way (max 2).

Ways might include:

• Wide variety/new products can be designed/made
• High/faster output
• Fewer mistakes / better quality / more accurate / less waste
• Fewer employees / replace labour
• Automation / become capital intensive
• Mechanisation / use (more) machinery
• Computer-aided design (CAD) / 3D design
• Computer-aided manufacturing (CAM) / 3D printing/robotics
• Computer-integrated manufacturing (CIM)

Other appropriate responses should also be credited.

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Question Answer Marks Notes

1(c) Outline two ways HCB could become more ethical. 4 To use words from the stem as application the
reference must be appropriate (i.e. make sense)
Award 1 mark for each relevant way (max 2). in relation to the point being made.
Award 1 mark for each relevant reference to this business (max 2).
The following words are likely to be appropriate
Ways may include: on this question:
• Pay fair wages [k] to its 200 employees [app] • Cars
• Ensure fair working conditions for employees [k] in its factory [app] • Factory
• Pay suppliers on time [k] when buying materials for its cars [app] • 200 employees
• Pay fair price to suppliers [k] • New technology/ changed production
• Charge customers fair prices / not fix prices with competitors [k] method
• Source environmentally friendly materials / less pollution / not dump
waste / use renewable energy (allow only once) [k] Other appropriate examples can also be
credited.
Other appropriate responses should be credited.

1(d) Explain two ways HCB could be affected by an increase in the 6 To use words from the stem as application the
interest rate in country X. reference must be appropriate (i.e. make sense)
in relation to the point being made.
Award 1 mark for a relevant way (max 2).
Award 1 mark for each relevant reference to this business (max 2). The following words are likely to be appropriate
Award 1 mark for each relevant explanation (max 2). for this question:
• Cars
Points might include: • Factory
• Increase costs of finance/borrowing [k] so less cash/funds to spend • 200 employees
on other areas of the business [an] such as becoming more ethical • New technology / change production
[app] method
• Decreased demand/fewer sales [k] which could lower revenue [an] • (More) ethical
from its cars [app]
• More difficult to get/more expensive to take out a loan [k] for the Other appropriate examples can also be
factory [app] which could delay investment [an] credited.
• Delay investment [k] into new technology [app] so may become
less competitive [an] Some points can be awarded as [k] or [an] but
do not award the same point twice.
Other appropriate responses should also be credited.

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Question Answer Marks Notes

1(e) Do you think manufacturing businesses will always benefit from 6 This is a general question so there are no marks
the introduction of import tariffs? Justify your answer. for application.

Award up to 2 marks for identification of relevant points. Award up to 2

marks for relevant development of points.
Award up to 2 marks for a justified decision as to whether
manufacturing businesses will always benefit from the introduction of
import tariffs.

Points might include:

• Higher costs of importing raw materials [k] which could lead to
higher prices / lower its profit margin / so may need to find new
suppliers locally [an]
• May increase price of imported finished goods / imported goods
more expensive [k] which may lead to fewer sales / less revenue /
less imports/increase demand for locally made products [an]
• Other countries may retaliate/introduce import tariffs [k] making it
more difficult to export [an]

Other appropriate responses should also be credited.

Justification might include:

Imported goods will become more expensive [k] leading to fewer sales
[an]. However, businesses have higher costs if they are importing raw
materials [k] which could lead to an increase in prices [an]. Overall,
whether businesses benefit is likely to depend on the proportion of raw
materials which are imported [eval], especially if there are no alternative
local suppliers it is more likely to be negatively affected [eval].

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Question Answer Marks Notes

2(a) Identify two possible causes of business failure. 2 Only award the first two responses given.

Award 1 mark for each relevant cause (max 2).

Causes may include:

• Poor planning/lack of objectives
• Cash flow problems / lack of working capital
• Poor management skills / lack experience / lack of knowledge
• Overexpansion / business expands too quickly
• Lack of demand/sales / (too much) competition
• Poor marketing
• Economic influences / changes in business environment

Other appropriate response should also be credited.

2(b) Calculate WFH’s acid test ratio for 2022. Show your working. 2

Award 2 marks for correct answer. Award 1 mark for correct method but
incorrect answer.

Correct answer: 0.5:1 [2]

Correct method e.g. (current assets - inventory) / current liabilities [1]
OR 20 000/40 000 [1]
OR (50 000 – 30 000) / 40 000 [1]

Where 0.5 is shown with no working, can award two marks.

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Question Answer Marks Notes

2(c) Identify four reasons why businesses hold inventory. 4 Only award the first four reasons given.

Award 1 mark for each relevant reason (max 4).

Points might include:

• To maintain production
• To protect against delays from suppliers
• To benefit from economies of scale
• To benefit from special offers / supplier discounts
• To reduce transport costs
• To meet unexpected changes in demand / sudden order
• To meet seasonal changes in demand
• To meet orders/ meet (high) demand

Other appropriate responses should also be credited.

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Question Answer Marks Notes

2(d) Explain why the following two stakeholder groups might be 6 To use words from the stem as application the
interested in WFH’s financial statements. reference must be appropriate (i.e. make sense)
in relation to the point being made.
Award 1 mark for a relevant reason (max 2).
Award 1 mark for each relevant reference to this business (max 2). The following words are likely to be appropriate
Award 1 mark for each relevant explanation (max 2). on this question:
• Hats
Points might include: • 15 000 / 10 000 / cash has decreased
• ($10 000) / loss
Employees: • 50 000 / 60 000 (current assets)
• To know if they have job security / whether made redundant [k] as • High levels of inventory
profit is falling [app] so may decide to look for jobs elsewhere [an] • 30 000 / 20 000 / 10 000 increase
• To know if they will receive wage payments on time [k] as there is (inventory)
less cash in the business [app] so may not be able to cover their • 0.5 (acid test ratio) OFR applies
basic needs/better standard of living [an] • Mass market
• To know whether to ask for a pay rise [k] when making hats [app] • Business might fail
they might look at the level of profit [an]
Other appropriate examples can also be
Suppliers: credited.
• To see current level of debt [k] to help decide whether to
give/extend trade credit [an] for materials needed for the hats [app] The [k] and [an] can be interchangeable.
• To see level of cash /liquidity [k] to know whether they will receive
payments on time [an]
• To know whether will receive payment on time [k] as if not may stop
supplying [an] especially as WFH might fail [app]
• Assess level of sales [k] as high/low may lead to additional/fewer
orders [an]

Other appropriate responses should also be credited.

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Question Answer Marks Notes

2(e) Do you think it is always better for a business to sell to a mass 6 This is a general question so there are no marks
market? Justify your answer. for application.

Award up to 2 marks for identification of relevant points. Award up to 2 Some points could be expressed as the
marks for relevant development of points. advantage or disadvantage of each method but
Award 2 marks for a justified decision as to whether it is always better do not award the same point twice.
for a business to sell to a mass market.

Points might include:

Mass marketing:
• (Potential for) high sales/customers [k] increases revenue [an]
• Benefit from economies of scale [k] so lower average/unit costs
(an)
• Spreads risk [k] so falling sales in one area may be offset by sales
elsewhere [an]
• High levels of competition [k] may mean have to lower prices [an]

Niche marketing [k]

• May be possible to charge higher prices [an] which can increase
profit margin [an]
• Able to closely meet customer needs [an] could lead to high
customer loyalty [an]
• Opportunity to earn higher profits might attract new competitors [an]
so prices may have to be reduced [an]

Other appropriate responses should also be credited.

Justification might include:

Businesses in a mass market may benefit from economies of scale [k]
which reduces average costs [an]. However, a niche market [k] may be
better as businesses are able to charge higher prices [an]. I think it is
better for a business to operate in a mass market because lower
average costs may allow lower prices which is likely to attract more
customers which could mean a higher overall amount of revenue than is
possible in a niche market. [eval]. [eval]

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Question Answer Marks Notes

3(a) Identify two responsibilities of supervisors. 2 Only award the first two responses given.

Award 1 mark for each responsibility (max 2).

• Provide feedback/report to managers (on progress/issues)
• Give out tasks/orders (to employees)
• Make sure employees carry out tasks
• Check/monitor quality of work/product
• Check workers are being efficient

Other appropriate responses should also be credited.

3(b) Identify two methods of written communication. 2 Only award the first two responses given.

Award 1 mark for each relevant method (max 2 marks).

Points might include:

• Letter
• Notice/notice board
• Text
• Memo
• Email
• Newsletter
• Website
• Social media/Facebook/WhatsApp
• Billboards/posters
• Leaflets/flyer
• (Local/national) newspapers
• (Specialist/general) magazines

Other appropriate answers should also be credited.

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Question Answer Marks Notes

3(c) Outline two benefits to AH of taking over a competitor. 4 To use words from the stem as application the
reference must be appropriate (i.e. make sense)
Award 1 mark for each relevant benefit (max 2). in relation to the point being made.
Award 1 mark for each relevant reference to this business (max 2).
The following words are likely to be appropriate
Points might include: for this question:
• Increase in market share [k] from 5% [app] • Insurance
• Benefit from economies of scale [k] in the competitive market [app] • 5% (market share)
• Power to set/influence market prices [k] for insurance [app] • 1000 employees
• Gain brand name of competitor [k] • 50 supervisors
• Gain skills/resources (from other business) [k] • Competitive market
• Protection from risk of takeover [k]
Other appropriate examples can be awarded.
Other appropriate responses should also be credited.

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Question Answer Marks Notes

3(d) Explain one advantage and one disadvantage to AH of its 6 To use words from the stem as application the
supervisors using an autocratic leadership style. reference must be appropriate (i.e. make sense)
in relation to the point being made.
Award 1 mark for a relevant advantage/disadvantage (max 2). Award 1
mark for each relevant reference to this business (max 2). The following words are likely to be appropriate
Award 1 mark for each relevant explanation (max 2). for responses on this question:
• Insurance business
Points might include: • 1000/950 employees
• 50 (supervisors)
Advantages: • Take over a competitor
• Quick/faster decision-making [k] so can respond to opportunities • Competitive market
sooner [an] such as taking over a competitor [app] • 5% (market share)
• Do not need to consult with employees [k] leading to quick(er) • Methods of communication
decision-making [an]
• Decisions are made by (more) experienced workers [k] so less Other appropriate examples can be credited.
chance of mistakes [an] in the insurance business [app]

Disadvantages:
• Demotivate employees [k] from the 1000/950 employees [app]
leading to higher labour turnover / because they have no input into
decisions [an]
• Supervisors have less time to focus on other tasks [k] leading to
lower productivity / as employees are closely monitored [an]
• Lack of ideas from employees [k]

Other appropriate responses should also be credited.

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Question Answer Marks Notes

3(e) Explain two sources of finance which could be used to fund 6 This is a general question so there are no marks
business growth. Which source of finance would be the best to for application.
use? Justify your answer.
Some points can be expressed as an advantage
Award up to 2 marks for identification of relevant points. Award up to 2 or disadvantage of different sources but only
marks for relevant development of points. award once.
Award 2 marks for a justified decision as to which source of finance
should be used to fund business growth.

Points might include:

(Bank) loan [k]

• Can receive all the money at once [an]
• (Long time to) repay [an]
• Need to pay interest [an] which can increase costs [an]

Retained profit [k]

• No repayment costs [an]
• May not be enough funds available [an]

Sell shares /share issue [k]

• No need to repay /permanent source of capital [an]
• Will dilute ownership / lead to loss of control [an]
• Shareholders may expect dividends [an]
• Sell (unwanted) non-current assets [k]

Other appropriate responses should also be credited.

3(e): Justification might include:

One option is a bank loan [k] but the business will need to pay interest
[an]. An alternative could be retained profits [k] as there is no need to
repay [an]. I think a bank loan is the best source because there may not
be sufficient retained profit which may delay the expansion. [eval] [eval]

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Question Answer Marks Notes

4(a) Identify two ways legal controls could affect marketing strategy. 2 Only award the first two responses given.

Award 1 mark for each relevant way (max 2).

Points may include:

• Cannot make misleading/false claims in advertisements / may have
to change/withdraw/restrict how or where advertise/promote
• Increase costs/time (spent on marketing)
• May have to change what is written on packaging / make sure
product description is accurate/not misleading on packaging
• Could lead to restrictions about where they can sell it
• Cannot sell underweight goods
• Goods must be fit for purpose
• Cannot charge less than minimum price set / cannot charge more
than maximum price set / cannot fix prices (with competitors)

Other appropriate responses should also be credited.

4(b) Define ‘quality control’. 2

Award 2 marks for a full definition. Award 1 mark for a partial definition.
Checking for quality at the end of the production process [2]
OR Checking the quality of goods through inspection [2]

Partial definition e.g. Checking the (standard/quality of) work [1]

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Question Answer Marks Notes

4(c) Outline two reasons why Viktor might use sampling when carrying 4 To use words from the stem as application the
out market research. reference must be appropriate (i.e. make sense)
in relation to the point being made.
Award 1 mark for each relevant reason (max 2).
Award 1 mark for each relevant reference to this business (max 2). The following words are likely to be appropriate
for this question:
Points might include: • Start-up
• Cheaper (than researching the whole market) [k] which is important • Photography
for a start-up business [app] • 5 employees
• Quicker (than researching the whole market) [k] to find out what • Sole trader
photography customers want [app]
Other appropriate examples can be credited.
Other appropriate responses should also be credited.

4(d) Explain two disadvantages to Viktor of operating as a sole trader. 6 To use words from the stem as application the
reference must be appropriate (i.e. make sense)
Award 1 mark for each relevant disadvantage (max 2). in relation to the point being made.
Award 1 mark for each relevant reference to this business (max 2).
Award 1 mark for each relevant explanation (max 2). The following words are likely to be appropriate
for responses on this question:
Points might include: • Photography
• Difficult to raise capital [k] which could restrict growth [an] of the • Start-up/new business
photography business [app] • 5 employees
• Unlimited liability [k] of his start-up business [app] so his personal • (Carry out) market research
assets are at risk if he cannot pay debts [an] • Motivate employees
• Has all the responsibility / make decisions on own [k] so may lead • Legal controls (over marketing)
to wrong decisions being taken [an]
• May have to work long hours [k] Other appropriate examples can be credited.
• Business does not have a separate legal identity [k]
• No continuity of business/ if die, the business will close [k]
• No one to share risks/losses with [k]

Other appropriate responses should also be credited.

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Question Answer Marks Notes

4(e) Explain two ways a service business could motivate its 6 This is a general question so there are no marks
employees. Which would be the best way to use? Justify your for application.
answer.
Some development could be expressed as an
Award up to 2 marks for identification of relevant points. Award up to 2 advantage or disadvantage of different methods
marks for relevant development of points. but only award the same point once.
Award 2 marks for a justified decision as to which is the best way for a
service business to motivate its employees.

Points might include:

• Bonus [k] employees will try to achieve targets set [an]
• Job rotation [k] (as variety) can make the work more interesting [an]
• Job enrichment [k] as employees feel that they are being given
more responsibility [an]
• Training [k] so employees have a higher level of skills [an]
• Increase wage (rate) [k] increases business costs [an]
• Profit sharing [k] which only pay if a profit is made [an]
• Praise [k] no cost / free [an]
• Commission [k] employees will have an incentive to try to sell more
products [an]
• Opportunities for promotion [k]

Other appropriate responses should also be credited.

4(e): Justification might include:

Bonus [k] as employees will try to achieve targets set by the business
[an]. Whereas job rotation [k] creates a more flexible workforce [an]. I
think that job rotation is best as the flexible workforce means that
services can still be offered when other employees are absent [eval]
which could still help the business to achieve its targets [eval].

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