1.1 The Purpose and Nature of Businesses

Question 1

What is meant by the term “consumer”?

Answer 1

Someone who uses a product.

Question 2

What is meant by the term “customer”?

Answer 2

Someone who buys a product.

Question 3

What is meant by the term “good”?

Answer 3

A physical tangible product/item.

E.g. A car, computers, furniture.

Question 4

What is meant by the term “product”?

Answer 4

A general term for goods and services.

Question 5

What is meant by the term “service”?

Answer 5

An intangible product/item.

E.g. A haircut, call centre service, dentist.

Question 6

What is meant by the term “entrepreneur”?

Answer 6

Someone who is willing to take risks involved in starting/setting up a business.

Question 7

What is meant by the term “entrepreneurship”?

Answer 7

The ability to be an entrepreneur - to take risks to develop a business idea.

Question 8

What is meant by the term “profit”?

Answer 8

Measures the difference between the value of a business’ revenue and it’s total cost. (revenue - costs)

Question 9

What is meant by the term “social enterprise”?

Answer 9

A business that is set up to help society rather than to make profit.

Question 10

Name 3 reasons someone decides to become entrepreneur.

Answer 10

POSSIBLE ANSWER:

• they have an idea, interest or hobby which they want to turn into a business.

• they have spotted a business opportunity/ gap in the market and want to respond to it.
E.g. A need for a low price café.

• they like the idea of being their own boss and not being answerable to other people at work.

• they want to make more money than they are able to as an employee in another business as they will keep the profits they earn.

• they may want to be able to fit their working lives around other commitments.
E.g. Caring for elderly relatives.

• They may be unhappy in their current job or may have been made reductant or have retired.

Question 11

What is meant by the term “resources”?

Answer 11

The inputs that businesses use to provide their goods or services.

Question 12

Name the 4 factors of production.

Answer 12

• land.
• labour.
• capital.
• enterprise.

Question 13

What is meant by the factor of production ‘land’?

Answer 13

This refers to all natural resources used in production, including the physical land itself and the site on which the business is located, as well as plants and mineral products such as oil.

Question 14

What is meant by the factor of production ‘labour’?

Answer 14

All inputs into production by humans, whether physical or mental.

Question 15

What is meant by the factor of production ‘capital’?

Answer 15

Man-made resources used in production such as buildings, machinery and vehicles.

Question 16

What is meant by the factor of production ‘enterprise’?

Answer 16

The skills of the people establishing and managing the business’s resources to meet the needs of customers.

Question 17

What is meant by the term “interest”?

Answer 17

The money paid by banks as a reward to attract people to save with them.

Question 18

What is meant by the term “opportunity cost”?

Answer 18

What is given up as a consequence of a particular decision.

Question 19

Give an example of an opportunity cost.

Answer 19

If a business used its savings to build a new factory, it will lose the interest that may have been paid on those savings by its bank.

Question 20

Name 4 characteristics of an entrepreneur.

Answer 20

• Risk Takers.
• Hardworking/ Committed.
• Innovative.
• Organised.

Question 21

Name all the business sectors.

Answer 21

> primary sector.
secondary sector.
tertiary sector.

Question 22

Give 3 examples of the primary sector.

Answer 22

• farming.
• agriculture.
• forestry.
• mining.

Question 23

Give 2 examples of the secondary sector.

Answer 23

• car manufacturing.
• construction.

Question 24

Give 2 examples of the tertiary sector.

Answer 24

• education.

• health care.

Question 25

What is the secondary sector?

Answer 25

Converting resources from primary sector into products.

Question 26

What is the tertiary sector?

Answer 26

Compromising businesses that supply services.

Question 27

Name the 4 functions of a business.

Answer 27

• operations.
• marketing.
• human resources (HR).
• finance.

Question 28

What is meant by the term “exchange rates”?

Answer 28

The price of one currency expressed in terms of another.

E.g. £1 = $1.50.

Question 29

What is meant by the term “gross domestic product (GDP)”?

Answer 29

Measures all the income earned in a country’s economy in a year.

Question 30

What is meant by the term “inflation”?

Answer 30

The rate (percentage) at which prices are increasing.

Question 31

What is meant by the term “interest rates”?

Answer 31

The cost of borrowing money or the reward for saving money expressed as a percentage.

Question 32

What elements of the business environment can have significant effects on businesses?

Answer 32

• technological change.
• economic change.
• legal change.
• environmental expectations.