3.2 & 3.4 - Outcomes of Making a Purchase & Influences on Wealth and Income

Question 1

What is an opportunity cost?

Answer 1

When consumers make any purchase, they incur and opportunity cost; the alternative you have to go without in a choice between competing things or events (eg. studying instead of playing videogames; sacrificing fun for knowledge).

Question 2

What is the equation for Cost-Benefit Analysis?

Answer 2

Cost-Benefit Analysis equation:
- Net Benefits = Benefits -Costs

Question 3

What are the factors that influence one’s wealth and income:

Answer 3

Factors that influence one’s wealth and income:
- Income levels
- Occupation
- Inheritance
- Education
- Geography and location

Question 4

What is the formula for Operational Profit Margin?

Answer 4

Operational Profit Margin formula = ((Revenue - COGS - Operational Expense)/Revenue) * 100

Question 5

What is Revenue?

Answer 5

Revenue is the income a business makes.

Question 6

What is Cost of Good Sales (COGS)?

Answer 6

Cost of Good Sales (COGS) are direct costs related to the product (eg. materials used to make product).

Question 7

What is Operational Expense?

Answer 7

Operational Expense are indirect costs not necessarily related to the product (eg. employee salary the business provides)

Question 8

What are the 2 types of insurance and what do they cover?

Answer 8

The 2 types of insurance:
1. Comprehensive Insurance - Covers loss or damage to your vehicle, as well as accidental damage to other people’s property.
2. Third Party Insurance - Covers your legal liability for damage to other people’s property, but not damage done to your own vehicle.