Brendan wants to be a successful entrepreneur．He plans to start up a flower shop using government support．Brendan＇s brother has offered to form a business partnership with him．Brendan knows it is important for a new business to use a suitable pricing method．He has already identified ways the business can increase added value．Brendan wants to know how an economic boom might affect his business． Explain two pricing methods a new business might use. Which is likely to be the best method to use? Justify your answer. .......................................................................................................................................

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 which is the best pricing method for a new business to use.

Points might include:
- Cost-plus [k] by adding a percentage onto the costs of production [an] it is easy to calculate [an]
- Penetration pricing [k] setting a lower price than competitors [an] could attract customers [an]
- Competitive pricing [k] setting a price similar/just below competitors [an] which may not cover costs [an]
- Price skimming \([\mathrm{k}]\) allows the business to recover development costs quicker [an] may lead to low sales [an]
- Promotional pricing \([\mathrm{k}]\)

Other appropriate responses should be credited.
Justification might include:
Cost-plus pricing \([\mathrm{k}]\) is easy to calculate [an]. Price skimming [k] allows the business to recover development costs quickly [an]. Cost-plus pricing is the best method as the business will make profit on each item sold [eval] whereas with price skimming they may not attract customers to their new business [eval].