3: Transforming resources into goods and services

Question 1

Input

Answer 1

Something that contributes to the production of a product or service.

Question 2

Output

Answer 2

Something that occurs as a result of the transformation of business inputs.

Question 3

Primary production

Answer 3

Extraction of resources at the first stage of production, involving resources such as land and raw materials. E.g. farming.

Question 4

Secondary production

Answer 4

The transformation of resource to produce finished goods and components. e.g. Car manufacture.

Question 5

Tertiary production

Answer 5

The transformation of resources to provide a service. The selling of products from the primary and secondary sector.

Question 6

Added value

Answer 6

The difference in value between the price of the finished product and the cost of materials used.

Question 7

How can a business add value?

Answer 7

• Advertising (creates interest, may convince customers to pay higher price, thereby increasing added value.)
• Branding (customers willing to pay more form branded item, even if actual physical processes is the same)
• Product features - (value added by innovative design and adding new features to existing products. e.g. iPhone)
• Location (add value if location highly desirable)
• Personal service (allows business to differentiate its product/serive)
• Reduce input costs - (done by using cheaper materials, or using materials more efficiently, for example, less waste. Consumers may perceive cheaper materials as lowering quality. The price might then have to be reduced.

Question 8

Benefits of businesses adding value:

Answer 8

• Differentiation from the competition - customers might be more willing to choose a particular brand over its rivals.
• Charging a higher price.
• Reducing the sensitivity of demand to changes in price.
• Higher profit margins.
• Targeting product or service at a different market segment.