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Pearson Edexcel · GCSE Business · Paper 1 · 2021

THE FULL
WALKTHROUGH

Every question. Every mark. Every technique — beautifully explained.

AO1 · Knowledge
AO2 · Application
AO3 · Analysis & Evaluation
27Questions
90Total Marks
3Sections
100% Strategy
Scroll to begin
AO
Before you begin

The Three
Assessment Objectives

Master these and you master the exam

AO1
Knowledge

Define and identify business terms correctly. These are your foundation marks — you cannot score higher without them.

ALWAYS DEFINE FIRST
AO2
Application

Link your answer to the specific business in the case study. Generic answers in Sections B & C are capped at 50%.

NAME THE BUSINESS
AO3
Analysis & Evaluation

Build "chains of reasoning" showing cause and effect. Use therefore, this leads to, consequently.

CHAIN YOUR LOGIC
A
Section A — General Business Knowledge

The Foundations

No case study here. Questions test your pure business knowledge. Keep answers generic but well-structured. Questions 1–3 cover multiple choice, explain, and calculation questions.

35 Marks Total
1a
Question 1(a)1 Mark

Which one of the following is a long-term source of finance?

A Overdraft
B Trade credit
C Loan from family
D Venture capital ✓
⚠️ If you change your answer, cross through the wrong box and put a new cross. Don't scribble — the examiner must see your final choice clearly.
Why D is correct
Key Distinction
Long-term finance is usually repaid over more than 5 years, or is permanent investment in the business.
Why the others are wrong
An overdraft is short-term (days/weeks). Trade credit is 30–90 days. Family loan is variable but typically informal and short-term.
Venture Capital
Venture capital investors buy equity (ownership) in exchange for funds. This is a permanent, long-term source — they expect returns over many years.
1b
Question 1(b)1 Mark

Which one of the following could be used to identify customer needs?

A Questionnaire ✓
B Cash flow forecast
C Break-even chart
D Budget
Why A is correct
The question is asking about
Market Research — collecting information from customers about what they want.
Eliminate the others
Cash flow, break-even, and budgets are all financial management tools — they analyse money, not customer preferences. A questionnaire collects primary data directly from customers.
3-Mark Explain Questions — The Formula

Point → Because → Leads to → Therefore

Question 1(c)3 Marks

Explain one drawback to a business of having low levels of cash.

🚫 Common Pitfall: Do NOT list multiple reasons. The examiner only marks your first one. Go deep on ONE point — get all 3 marks from it.
Model Answer — Full 3/3
Point (1 mark)
The business may struggle to pay its suppliers on time.
Development (1 mark)
This is because there isn't enough liquid money available to cover immediate invoices, damaging trust with suppliers.
Further Development (1 mark)
Therefore the business might run out of raw materials, causing production to stop and sales to be lost.
✅ Magic words: "This means that…", "Consequently…", "As a result…", "Therefore…"
1d
Question 1(d)3 Marks

Explain one way an entrepreneur can reduce the risk of failure when starting a new business.

Model Answer
Point (1 mark)
By conducting thorough primary market research before launching.
Development (1 mark)
This is because it allows the entrepreneur to gather direct feedback about what price and features customers are willing to pay for.
Further Development (1 mark)
Therefore the entrepreneur is less likely to produce a product no-one wants, ensuring a steady stream of revenue from launch.
Two-Pick Multiple Choice

Select TWO correct answers

Question 2(a)2 Marks

Which two can be interpreted from a break-even diagram?

A The break-even point ✓
B The business's cash position
C The margin of safety ✓
D The business's profit margin %
💡 A break-even diagram shows the output level where TR = TC, and the gap between actual output and BEP (margin of safety). It does NOT show cash or % margins directly.
Question 2(b)2 Marks

Which two are types of technology a business could use?

A E-commerce website ✓
B Market research focus group
C Computer-aided manufacturing ✓
D Newspaper advertisement
⚠️ Focus groups and newspaper ads are NOT technology — they are market research and promotion methods. Technology = digital/automated systems.
2c
Question 2(c)2 Marks

Complete a cash-flow forecast table. Find the Net Cash Flow for June and the Closing Balance for May.

💰 Golden Rule: Even if your final answer is wrong, show your working — you can still earn 1 mark for the correct formula or method (substitution mark).
How to tackle cash flow calculations
Net Cash Flow = Total Inflows − Total Outflows
Closing Balance (May) = Opening Balance + Net Cash Flow (May)
Opening Balance (June) = Closing Balance (May)
Net Cash Flow (June) = Total Inflows − Total Outflows for June
📝 Always write the formula before substituting numbers. Layout matters — examiners follow your working line by line.
Question 2(d)3 Marks

Explain one reason why an entrepreneur may adapt an existing product to come up with a new business idea.

Model Answer
Point
It reduces R&D costs because the core technology already exists and is proven.
Development
This leads to a faster time-to-market, allowing the business to start generating sales sooner.
Further Dev
Therefore the business can preserve startup capital and reach break-even much faster.
Question 2(e)3 Marks

Explain one disadvantage of using a focus group to collect market research data.

Model Answer
Point
Data may be biased due to "groupthink" — participants agree with the most vocal member rather than giving honest opinions.
Development
This leads to the business receiving inaccurate information about how the wider market truly feels.
Further Dev
Therefore the business might make poor decisions based on flawed data — producing a product that fails to meet real customer needs.
Question 3(a)1 Mark

Which one is a disadvantage of starting a partnership?

A Shared decision making
B Access to more capital
C Unlimited liability ✓
D Shared workload
💡 Unlimited liability means partners are personally responsible for ALL business debts — they could lose personal assets like a house. This is the key disadvantage.
Question 3(b)2 Marks

Calculate, to 2 decimal places, the percentage decrease in sales revenue from January (£10,300) to March (£6,400).

Full Working — 2/2
% Change = (New − Old) ÷ Old × 100
= (6,400 − 10,300) ÷ 10,300 × 100
= (−3,900) ÷ 10,300 × 100
= −0.3786… × 100
Answer: −37.86%
Question 3(c)3 Marks

Explain one disadvantage to a small business of an increase in interest rates.

Model Answer
Point
The cost of servicing existing variable-rate loans will increase.
Development
This means higher monthly outflows, reducing net cash flow.
Further Dev
Therefore less retained profit is available to reinvest into growth or new equipment.
Question 3(d)3 Marks

Explain one disadvantage of manufacturing a high-quality product.

Model Answer
Point
The cost of raw materials and skilled labour will be significantly higher.
Development
This increases the variable cost per unit and raises the total costs of the business.
Further Dev
Therefore the business must charge a higher selling price, limiting its customer base to high-income earners only.
6-Mark Discuss Question

Two Points × Three Marks Each

Question 3(e)6 Marks

Discuss the impact on a small business from the introduction of new employment laws.

📌 This is a Section A question — no case study needed. However you must write two fully developed points (3 marks each). No conclusion required.
Model Answer — 6/6

POINT 1 — Increased Costs

Point
New employment laws may force the business to increase wages (e.g. a higher national minimum wage).
Development
This increases labour costs, reducing the profit margin on every unit sold.
Further Dev
Therefore the business may have to raise prices, risking losing price-sensitive customers to cheaper rivals.

POINT 2 — Better Motivated Workforce

Point
Employment laws such as better health & safety requirements can improve staff morale.
Development
This leads to lower staff turnover as employees feel valued and secure in their roles.
Further Dev
Therefore the business spends less on recruitment and training, saving money in the long run.
B
Section B — Case Study

Sports Tours Ltd

From this point on, context is everything. You must mention the business and its specific products — tours, football, netball, tournaments — in every answer. Generic answers are capped at 50%.

30 Marks Total
Question 4(a)2 Marks

Outline one way that Sports Tours Ltd meets customer needs.

Structure: 1 mark for the point + 1 mark for application to the specific business.
Model Answer — 2/2
Point (1 mark)
Sports Tours Ltd meets customer needs by arranging and personalising sporting experiences for their clients.
Application (1 mark) — AO2
For example, they arrange specific games and entry to international tournaments for football and netball teams, meeting the specific needs of each sports club.
6-Mark Analyse — Two BLT Chains with Context

Q4b: Internet & Location

Question 4(b)6 Marks

Analyse the impact of the internet on the location of Sports Tours Ltd's premises.

Point 1 — Cost Saving (3 marks)
Point
Sports Tours Ltd can choose a location based on low rent rather than high footfall.
Application — AO2
As an online-only tour operator, customers book their netball or football trips through the website — not by visiting a shop.
Leading to
Significant reduction in fixed costs — no need to pay premium prices for a high-street location.
Therefore
The business can offer more competitive prices to sports teams, helping them gain a larger market share.
Point 2 — Global Reach (3 marks)
Point
The internet allows them to operate from a single central office while reaching a global audience.
Application — AO2
They can communicate with international tournament organisers and UK schools via email and their online platform from any location.
Leading to
Increased efficiency, managing multiple tours across different countries without regional branches.
Therefore
A smaller physical footprint while still expanding international revenue.
Exchange Rate Calculations

Q5a & Q5b: Hotel Prices

Question 5(a)2 Marks

Calculate the price in £ of a hotel room in 2010 using the provided exchange rates. Give answer to 2 d.p.

Method
£ = Foreign Price ÷ Exchange Rate
e.g. If room = €120 and rate = €1.20 per £
£ = 120 ÷ 1.20 = £100.00
Question 5(b)2 Marks

Calculate the 2019 price in £ after a price increase in euros, using the new exchange rate.

Two-Step Method
Step 1: Apply the % increase to the original Euro price
New Euro price = Old price × (1 + % increase/100)
Step 2: Convert to pounds
£ = New Euro price ÷ 2019 Exchange Rate
⚠️ Always show both steps — each step can be worth 1 mark.
Question 5(c)6 Marks

Analyse the impact on Sports Tours Ltd of using market mapping to target customers.

Point 1 — Identifying Gaps (3 marks)
Point
Market mapping helps Sports Tours Ltd identify gaps in the sports travel market.
Application — AO2
By plotting competitors on price/quality axes, they might discover no-one is offering high-quality, low-cost tours for junior rugby teams.
Leading to
Tailoring tour packages specifically to fill that unoccupied niche.
Therefore
First-mover advantage in that niche → increased sales and brand loyalty from those sports clubs.
Point 2 — Competitive Analysis (3 marks)
Point
Market mapping allows the business to understand strengths and weaknesses of direct rivals.
Application — AO2
The map shows which other operators compete for the same prestige football tournaments that Sports Tours Ltd targets.
Leading to
More informed decisions — compete on price or differentiate with added value?
Therefore
Less wasted marketing budget, better return on investment.
Question 6(a)1 Mark

State one fixed cost that Sports Tours Ltd will need to pay.

Model Answer

A fixed cost is one that does not change with output. For Sports Tours Ltd this could be:

  • Rent on their office premises
  • Insurance
  • Salaries of permanent staff
  • Software subscriptions / website hosting
💡 Any reasonable fixed cost specific to their business context is acceptable — just make sure it does not change with number of tours booked.
Question 6(b)2 Marks

Outline one likely impact of changing levels of consumer income on Sports Tours Ltd.

Model Answer — 2/2
Point
If consumer income falls, demand for sports tours will decrease.
Application
This is because sports tours are a luxury — schools and clubs will cut discretionary spending when budgets are tight, reducing the number of bookings Sports Tours Ltd receives.
9-Mark Justify — The Big Structure

2 × BLT + AJIM Conclusion

Question 6(c)9 Marks

Justify which one of two options Sports Tours Ltd should choose to add value:

✓ Option 1

Using professional sports venues for tournaments

Option 2

Providing teams with top-class coaching when on tour

Para 1 — Argue for Option 1 (3 marks)
Point
Professional venues create a "once-in-a-lifetime" USP.
Application — AO2
Playing at a stadium like St. George's Park for a football tournament makes the tour feel prestigious for the school teams booking.
Leading to
Higher customer satisfaction → repeat bookings.
Therefore
Sports Tours Ltd can charge a higher premium price per student, increasing profit margins.
Para 2 — Acknowledge the Drawback (3 marks)
However…
Professional venues carry high fixed costs compared to coaching.
Application — AO2
Hiring a stadium involves rental fees and insurance, whereas coaching can be delivered at any local park.
Leading to
A higher break-even point for each tour — they need more netball/rugby teams to sign up.
Therefore
Venues significantly increase financial risk if a tournament is under-subscribed.
Para 3 — AJIM Conclusion (3 marks)
A
Answer
Sports Tours Ltd should choose Option 1 — Professional Venues.
J
Justify
Schools want an "experience they can't get at home" — a professional stadium is a unique memory that justifies the high cost of the tour.
I
It Depends On
The exchange rate — if the pound is weak, international stadium hire could become too expensive for UK schools.
M
Most Important Factor
The target market's budget — if schools are from low-income areas, the added value of a stadium won't matter if they simply can't afford the trip.
C
Section C — Case Study

That Feeling

The most heavily weighted section. That Feeling is Justin's unique barbershop in Potters Bar — featuring arcade games, vintage clothes, and a clientele including professional footballers. Every answer needs these specific details.

25 Marks Total
Q7(a)1

State one cash outflow for That Feeling.

Answer
  • Wages for the barbers
  • Rent on the Potters Bar shop
  • Buying branded clothes to sell
  • Electricity for the arcade machines

Any specific outflow for this business earns the mark.

Q7(b)1

Identify what % of entrepreneurs were in the same age range as Justin from the bar chart.

How to tackle it

Read the bar chart directly. Find Justin's age group bar and read the % from the Y-axis. Write it exactly — no rounding needed for a 1-mark reading.

📊 Data reading questions: read carefully, use a ruler on screen/paper, quote exact figure from chart.
Q7(c)2

Outline one benefit to employees at That Feeling from being mentored by Justin.

Model Answer — 2/2
Point
Employees gain new hairdressing skills and business knowledge from Justin's experience.
Application
This increases their confidence and productivity at That Feeling, improving the quality of haircuts and the customer experience.
Question 7(d)9 Marks

Justify which option That Feeling should choose to improve brand awareness:

Option 1

Increase its range of own-brand clothing

✓ Option 2

Open a second shop

Para 1 — For Option 2 (3 marks)
Point
A second shop reaches a wider geographical market.
Application — AO2
A second location in a different town captures customers who wouldn't travel to Potters Bar for a haircut.
Leading to
Increased total sales volume and brand awareness across a new region.
Therefore
More revenue to cover fixed costs → higher overall profit.
Para 2 — Economies of Scale (3 marks)
Another point
Expansion allows economies of scale on purchasing.
Application — AO2
Two shops means Justin can buy hair products and arcade machine parts in larger quantities.
Leading to
Lower cost per unit → improved gross profit margin on every service.
Therefore
Business becomes more financially stable and less vulnerable to supplier price rises.
AJIM Conclusion — 3 marks
A
Answer
Justin should choose Option 2 — opening a second shop.
J
Justify
That Feeling relies on a physical experience (arcade games & drinks) that cannot be replicated by just selling clothing online.
I
It Depends On
The location of the new shop — if rent is too high or the area lacks the "trendy" demographic Justin needs, the shop could lose money.
M
Most Important
Finance availability — opening a shop has high startup costs. If Justin cannot secure a low-interest loan, the risk of failure increases significantly.
The Crown Jewel — 12-Mark Evaluate

Q7e: The Big Evaluate

Both sides + Deep judgement = Level 3 marks

Question 7(e)12 Marks

Evaluate the importance of achieving non-financial objectives for the success of That Feeling.

✅ Case FOR Non-Financial (Para 1)
Point
Non-financial goals like personal satisfaction are the foundation of That Feeling.
AO2 Application
Justin's passion for the "unique experience" (arcade games & vintage clothes) attracts high-profile clients like professional footballers.
Leading to
Strong brand image differentiating the Potters Bar shop from standard high-street barbers.
Therefore
By focusing on personal vision, he creates a "destination" business that naturally generates high revenue.
⚠️ Case AGAINST — Financial Needed Too (Para 2)
However…
Financial objectives like survival are equally vital for a new small business.
AO2 Application
Without hitting profit targets, That Feeling couldn't pay wages of barbers or rent on the Potters Bar premises.
Leading to
Poor cash flow → the passion project could go bankrupt regardless of how much customers love the arcade machines.
Therefore
Profit must be a primary objective to provide the "cushion" needed to survive the first two years.
AJIM Conclusion — The Evaluative Judgement (earning Level 3)
A
Answer
Overall, non-financial objectives are the most important driver for That Feeling's specific model.
J
Justify
In the competitive hairdressing industry, Justin's Competitive Advantage is his "unique feeling" — more valuable than a short-term profit goal.
I
It Depends On
The economic climate — in a recession, if people have less disposable income, Justin may have to abandon the "passion" for vintage decor and focus on cutting costs.
M
Most Important Insight
The two objectives are linked. As Justin says: if you provide the best experience, the financial rewards follow. Without the "feeling," the business has no USP.
The Master Reference

Full Marks Cheat Sheet

Question Type Marks Structure Secret Sauce
Multiple Choice 1–2 Select correct box(es) Cross out wrong answers cleanly. For 2-mark, both must be correct.
Explain 3 Point + Dev + Further Dev Use "Therefore" and "This leads to." ONE point deeply, not multiple shallow ones.
Calculate 2 Formula + Substitution + Answer Always show working — earn the substitution mark even if answer is wrong.
Outline 2 Point + Application Must reference the specific business by name with specific details.
Analyse 6 2 × full BLT chains (3 marks each) Must mention specific business details (AO2). No conclusion needed.
Justify 9 2 × BLT + AJIM Conclusion Explain the downside of your chosen option. AJIM conclusion is essential.
Evaluate 12 For + Against + AJIM (both sides!) Use "It depends on…" conclusion. Link back to the case study in EVERY sentence.
Before you hand in your paper

The 100%
Checklist

Click each item as you complete it

○
Named the Business
Did you mention "Sports Tours Ltd" or "That Feeling" in every Section B/C answer?
○
Named the Product
Did you mention tournaments, stadiums, haircuts, or arcade games?
○
Used the Chain
Do ALL explain/analyse paragraphs have "This leads to" and "Therefore"?
○
Written the AJIM
Does your 9-mark or 12-mark conclusion have all 4 parts: Answer, Justify, It depends, Most important?
○
Shown All Workings
For calculations: formula → substitution → answer. Every step visible.
○
One Point, Deeply Developed
For 3-mark explains: only ONE point, developed into 3 logical steps. Not 3 separate points.
○
Crossed Out MCQ Changes
If you changed a multiple choice answer, have you crossed through the old one clearly?
○
Both Sides in 12-Marker
Evaluate Q7e: have you argued BOTH for and against non-financial objectives?
You've Got This.

Every mark has a method. Every method has been shown to you right here.

2021 Paper 1 · GCSE Business · Pearson Edexcel