1.1 Business Activity

Question 1

Needs

Answer 1

A good or service essential for living e.g. food, water, shelter

Question 2

Want

Answer 2

A good or service people would like to have but is not essential for living e.g. newest phone

Question 3

Define scarcity

Answer 3

The lack of sufficient products to fulfil the total wants of the population

Question 4

Define opportunity cost

Answer 4

The next best alternative given up by choosing another item

Question 5

Define specialisation

Answer 5

When people and businesses concentrate on what they work best at

Question 6

Specialisation advantages

Answer 6

More efficient, higher output, quicker + cheaper training

Question 7

Specialisation disadvantages

Answer 7

Workers become bored, output affected if worker is absent

Question 8

Explain 4 factors of production

Answer 8

Land - any natural resource
Labour - number of workers
Capital - finance, machinery, equipment
Enterprise - owner of business (entrepreneur)

Question 9

Explain the economic problem

Answer 9

There exist unlimited wants but limited resources to produce the goods and services to satisfy those wants. This creates scarcity

Question 10

Purpose of business activity

Answer 10

Businesses combine factors of production to make products which satisfy people’s wants

Question 11

Define added value

Answer 11

The difference between the selling price of a product and the cost bought in materials and components

Question 12

Methods to increase added value

Answer 12

1. Increase selling price, but keep the cost of materials the same
2. Reduce the cost of materials, but keep the selling price the same