Business activity

Question 1

Definition of need.

Answer 1

Need is a good or service that is essentialal for living.
Examples of needs: water,food,shelter

Question 2

Definition of want

Answer 2

Want is a good or service which people would like to have, but which is not essential for living. People’s wants are unlimited.

Question 3

Economic problem

Answer 3

There are unlimited wants but limited resources to produce the goods and services to satisfy the wants. This creates scarcity.

Formula of economic problem:
unlimited wants + limited resources = scarcity

Question 4

Factors of production

Answer 4

Factors of production are those resources that are needed to produce goods or services.

Question 5

What are the factors of production? (4)

Answer 5

Land
Labour
Capital
Enterprise

Question 6

Factors of production - Land

Answer 6

All the natural resources provided by nature. Examples are: fields, forests, oil, gas and other mineral resources.

Question 7

Factors of production - Labour

Answer 7

Number of people available to make the product. This includes skilled and unskilled workers.

Question 8

Factors of production - Capital

Answer 8

This is the finance, machinery and equipment needed to make the product.

Question 9

Factors of production - Enterprise

Answer 9

This is the skill and risk taking ability of the person who brings all the other factors of production together to produce the goods or service. These are the entrepreneurs.

Question 10

Scarcity

Answer 10

Scarcity is the lack of sufficient products to fulfil the wants of the population.

Question 11

Opportunity cost

Answer 11

Opportunity cost is the next best alternative given up by choosing another item.

Should I buy a headphones or a new phone?
I chose to buy a new phone so the headphones becomes the opportunity cost.

Question 12

Specialisation

Answer 12

Specialisation occurs when people and businesses concentrate on what they are best at.

Question 13

Why is specialisation common?

Answer 13

1. Specialised machinery and technologies are now widely available.
2. Increasing competition means that the business has to keep costs low.
3. Most people realise that higher living standards can result from being specialised.

Question 14

Division of labour

Answer 14

Division of labour is when the production is split into different tasks and each worker performs a different task. Its a form of specialisation.

Question 15

Advantages of division of labour (3)

Answer 15

1. Workers are trained with one task and specialise in this. This increases output and efficiency.
2. Less time is wasted movingform oe workbench to another.
3. Quicker and cheaper to train workers because less skills need to be taught.

Question 16

Disadvantages of division of labour (2)

Answer 16

1. Workers might get bored - this might decrease efficiency
2. If worker is absent - there is no one else can do that job - production could be stopped.

Question 17

Business

Answer 17

Businesses combines the factors of production to make products to satisfy peoples wants and needs.

Question 18

What does business activity do? (3)

Answer 18

1. Combines the factors of production
2. Produces good and services
3. Employs people

Question 19

Added value

Answer 19

Added value is the difference between the selling price of a product and the cost of brought in materials and components.

Formula:
Selling price - cost of materials and components = added value

Question 20

Why is added value important?

Answer 20

Sales revenue must be bigger than cost of materials.
–This is so the business can pay for other costs - labour, management expenses, advertising, power
– So a business can gain profit if the other expenses is less than added value.

Question 21

How can a business increase added value? (1)

Answer 21

Increasing selling price but keep cost of materials same.
-Possible if the business keeps a high quality image.

Question 22

How can a business increase added value? (2)

Answer 22

Reduce cost of materials but keep the selling price the same.
-Lower price of materials means that the quality of the product is lower.