1.5.5 Business Choices

Question 1

How/why do businesses face choices?

Answer 1

• chose target market

- limited resource

Question 2

Every business faces…

Answer 2

• Limited resources = make choices
• decisions made under circumstance of uncertainty
• taking 1 course of action/decision= affect business ability to take alternative action

Question 3

4 scarce resources are:

Answer 3

1. finance (cash)
2. capacity
3. time
4. skills/capabilities

scarce = choices made about how they are used

Question 4

opportunity cost

Answer 4

• cost of missing out on the next best alternative when making a decision
• alternative that is forgone/sacrificed

Question 5

4 examples of opportunity costs in economy:

Answer 5

1. work leisure choices (not work = lost wages)
2. investing today for consumption tomorrow (production of consumer goods given up for today)
3. use of scarce farming land (less wheat = food prices increase)
4. government spending priorities (less in other opportunities)

Question 6

Types of opportunity costs

Answer 6

1. Personal:
   - regular income (starting new bus)
   - assets at expense of personal investment
   - long hours = of family time
2. Developing business ideas:
   - one idea chosen = other sacrificed
   - launching = at expense further development
   - committing capital to invest in assets (restrict other)

Question 7

9 Factors considered when making a decision;

Answer 7

1. risk
2. finance
3. value of decision
4. corporate obj
5. timing
6. skill sets
7. competitive landscape
8. market/scientific research
9. ethics

Question 8

Trade-off:

Answer 8

• consequence/compromise of a choice made
• more of one thing = less of another

-less market research = less successful new product launch