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Which of the following would cause a demand curve for a good to be price inelastic?
Essential goods and services such as electricity, fuel, basic food stuffs, commuter transport and habitual products such as tobacco, alcohol and sugar-based drinks are often sited as facing a relatively inelastic demand curve. This means when the price goes up, the quantity demanded does not decrease very much and so they are often the target of government taxation.
LO2, AC 2.2
The sourcing manager has decided to adopt an adversarial style of negotiation to take advantage of the buyer's greater bargaining power over the suppliers. In what other circumstances should an adversarial relationship be used?
An adversarial style is appropriate when issues are non-negotiable, such as health and safety commitments (D). In these scenarios, compliance is required without compromise, and a firm stance may be necessary. This aligns with CIPS guidance, where adversarial tactics are used in non-negotiable contexts to enforce strict standards.
Tony is undertaking a negotiation with a strategic supplier and is frustrated by the lack of progress. He proposes using threats to get what he wants from the negotiations. Is this the correct course of action?
Using threats is generally inappropriate in strategic supplier negotiations where a long-term, trust-based relationship is required (C). Threatening tactics can damage the relationship and may result in resistance from the supplier. CIPS advocates for collaborative approaches in strategic relationships to foster mutual trust and achieve sustainable agreements.
Which of the following are examples of variable costs?
Building and site rent
Annual insurance premium
Raw materials expenditure
Delivery costs for materials
Raw materials expenditure (3) and delivery costs for materials (4) are variable costs as they fluctuate with production levels. Variable costs vary directly with the volume of production, unlike fixed costs such as rent or insurance, in line with CIPS's classifications of cost types in procurement.
Which of the following is categorised as fixed cost?
:
An organisation's expense can be categorised into three groups:
Fixed Costs -- costs that do not change with output.
Variable Costs -- costs that vary in direct proportion to output.
Semi-variable costs -- costs that are a combination of the above, with both a fixed and variable element.
Among the four options:
'Land rental paid in advance': This is fixed cost. The rental won't increase when the production increases.
'Additional pallet hires due to higher demand in year-end season': This can be identified as semi-variable cost (or step cost).
'Governments taxes': The taxes are often levied by a percentage of income or revenue. Therefore, it is variable
'Raw materials for next year production': This is obviously variable cost.
CIPS study guide page 79-84
Study tips: Fixed variable and semi-variable costs - AAT Comment
