B Essay questions

1 Explain the advantages and disadvantages of buying goods by hire purchase from the point of view of:

(a) the consumer;

(b) the retailer.

2 A customer buys goods to the value of £1000 (cash price) on hire purchase. He pays a 20% deposit, and 20 monthly instalments of £60.

(a) What is the total hire purchase price of the goods?

(b) When he makes his seventh payment how much has he paid?

(c) At which stage of the payments will the vendor have to take out a court order to repossess the goods?

(d) When may the hirer return the goods to the vendor without having to make any further payments?

3 Write a short paragraph about each of the following:

(a) finance companies;

(b) the main differences between hire purchase and credit sale agreements;

(c) mortgages.

4 Explain why under a credit sale agreement the vendor will probably take the hirer to court if he falls behind with his payments whilst with a hire purchase agreement he will probably repossess the goods if this is possible.

5 Explain how the government is able to control consumer spending by regulating the amount of consumer credit available.

What effect will this control have on inflation?

9. The wholesaler

The wholesaler is in between the manufacturer and the retailer and is often referred to as the middleman.

The wholesaler’s premises are normally a large warehouse on the outskirts of a city, where large quantities of goods are stored.

Perhaps the greatest advantage offered by the wholesaler is the time, trouble, and money saved for both the manufacturer and the retailer.

Transport network without the wholesaler

FACTORY

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Shop Shop Shop Shop Shop Shop Shop Shop Shop

Transport network with the wholesaler

FACTORY

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I

WHOLESALER I»

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Shop Shop Shop Shop Shop Shop Shop Shop Shop

The diagrams show how both the retailer and the manufacturer are saved both time and transport costs. Other advantages offered by the wholesaler are:

1 saving the manufacturer advertising costs;

2 paying the manufacturer promptly for the goods;

3 allowing the retailer credit facilities (but the wholesaler will charge high interest rates if the retailer does not settle his or her account promptly at the end of the month);

4 providing showroom facilities where large quantities and varieties of goods can be viewed by the retailers;

5 giving expert advice to both the manufacturer and the retailers;

6 providing large storage facilities for the manufacturer;

7 helping the manufacturer by packing, blending, grading, labelling etc.

Each kind of goods will be supplied through its own special wholesaler, e.g. clothing by a clothing wholesaler, and food from q food wholesaler etc. Perhaps the most important task that the wholesaler performs for the manufacturer is advertising and acting as salesman. Without this help the manufacturer would become too deeply involved with the selling process and possibly neglect his main task, which is to manufacture the goods.

The manufacturer, wholesaler and retailer will all ‘insult up’ the goods and take their share of the profits. The following table shows an example of this.

Sale of a dress

Manufacturing cost £1.50

Selling price to wholesaler £2.50 Manufacturer’s profit £1.00

Wholesaler’s buying price	£2.50
Wholesaler’s selling price	£3.50
Wholesaler’s profit	£1.00
Retailer’s buying price	£3.50
Retailer’s selling price	£7.00
Retailer’s profit	£3.50

The profit made at each stage is the mark-up and the largest mark-up or profit is usually made by the retailer.

It is possible to trade without the help of the wholesaler and carry out direct selling. For example, Boots the Chemists manufacture many of the products they sell in their shops. However, the wholesalers do provide a very important service in the distribution of goods to the consumer and it would be almost impossible to manage without them.

Answer the following questions in your notebook.

A

1 Why is the wholesaler often called the middleman?

2 Where does the wholesaler normally store goods?

3 Draw one or two diagrams showing how the wholesaler saves the manufacturer time and transport costs.

4 The wholesaler pays the manufacturer promptly for the goods which he sells him. Explain how this helps the manufacturer.

5 What do we mean when we say that the wholesaler allows the retailer credit facilities?

6 How do the showroom facilities provided by the wholesaler help the retailers and the manufacturers?

7 Write a paragraph saying how a wholesaler might pack, blend or label goods, to help the manufacturer?

8 What is ‘mark-up’ and where does the largest mark-up usually appear?

9 Explain what is usually meant by ‘direct selling’?

10 What is cash and carry selling?

B

1 Another name for the whole __________ is the middle __________.

2 The wholesaler normally stores his goods in a large w__________ house.

3 Most wholesalers are usually situated on the out __________ of large towns or cities.

4 The wholesaler saves trans__________ costs and t__________ for the manufacturer.

5 Perhaps the two most important tasks for the wholesaler are to a__________ and s__________ for the manufacturer.

6 If credit facilities are allowed for the retailers then they are usually allowed to pay their accounts at the e__________ of the m__________.

7 The wholesaler may help the manufacturers to p__________, bl__________, gr__________, or label the goods.

8 The profit made at each stage of the selling process is quite often called m__________-up.

9 If the wholesaler is not used this is called d__________ s__________.

10 The wholesaler gives ad __________ and b___________ to both the man__________ and the re__________.