1.5.5 Business Choices

Question 1

opportunity cost

Answer 1

this measures the cost of a choice made in terms of the next best alternative foregone or sacrificed

Question 2

examples of opportunity cost in business environment

Answer 2

work-leisure choices
- deciding not to work an extra ten hours a week is the lost wages given up
government spending priorities
- investing more money in the NHS making less money available for education or defence equipment
investing today for consumption tomorrow

use of scarce farming land
-using farmland to grow wheat for bio-fuel means less wheat available for food production, causing food prices to rise

Question 3

trade-offs

Answer 3

a decision between two choices arising from scarcity of resources where having more of one thing potentially results in having less of another

Question 4

how can less market research result in a trade-off?

Answer 4

this lowers costs but may cause the launch of a new product to be less successful, resulting in lower sales

Question 5

how can higher quality standards result in a trade-off?

Answer 5

this aims to build the reputation, however more costs may arise to check and control quality and assurance

Question 6

how can higher advertising online result in a trade-off?

Answer 6

reduced advertising on TV or other media

Question 7

how can lower risk investment choices result in a trade-off?

Answer 7

gain potentially lower rewards

Question 8

what should a business consider to help make a decision?

Answer 8

-obtain all relevant info and draw up pros and cons list
-balance short and long term goals, consider opportunity cost
-ask other colleagues or trustworthy professionals before a decision is made

Question 9

how can an entrepreneur be rewarded from a successful trade-off?

Answer 9

independence, flexibility, fulfilling a dream and the chance of becoming rich

Question 10

what consequences can an entrepreneur face from a trade-off?

Answer 10

responsibility over all decisions and financial costs