1.1 Business activity

Question 1

Examples of needs

Answer 1

food, drink, clothing, shelter etc

Question 2

Examples of wants

Answer 2

laptop, smartphone etc

Question 3

Scarcity

Answer 3

exists when there is not enough of resources (land, labour, capital, enterprise) to satisfy everyone’s wants

Question 4

Opportunity cost

Answer 4

The next best alternative foregone when making a decision

Question 5

Purpose of business activity

Answer 5

Businesses are set up to satisfy our needs by providing physical goods (manufacturing) and services

Question 6

Adding value

Answer 6

Everything that a business does to make a good more desirable
Added value= the difference between what a business pays its suppliers and the price it charges

Question 7

How added value can be increased

Answer 7

• Speedy service: easier & faster for customers
• quality: people will buy products that are durable
• USP: competitive edge
• convenience: people will buy things that make their life easier
• branding: instantly recognisable- you know exactly what you would get
• design: appeals the taste for fashion

Question 8

Specialisation

Answer 8

Firms concentrate on particular areas of activity in which they have built up a competitive advantage over rivals

Question 9

Examples of specialisation

Answer 9

division of labour

specialisation by region/country etc

Question 10

Advantages of specialisation

Answer 10

• productive use of resources
• more productive in that particular task
• larger outputs at lower unit costs
• concentration of specialists= enables the sharing of knowledge & skills between them

Question 11

Disadvantages of specialisation

Answer 11

• over-reliance
• lack of motivation
• lack of flexibility, difficult to respond to change
• where tasks are linked-> delays in one area slows down the whole process