Chap 1. Business Activity

Question 1

What is a need?

Answer 1

Need is a good or service essential for survival

Question 2

What is a want?

Answer 2

Want is a good or service which people desire and is not necessary for survival

Question 3

What is the economic problem?

Answer 3

Limited resources and unlimited wants

Question 4

Name the 4 factors of production, their definition and reward.

Answer 4

Land - natural resources. Reward:rent
Labour - mental and physical effort.
Reward:wages
Capital - man-made resources.
Reward:interest
Enterprise - takes risks
Reward:profit

Question 5

What is scarcity?

Answer 5

Limited resources

Question 6

What is opportunity cost?

Answer 6

Next best alternative foregone

Question 7

What is specialisation?

Answer 7

Workers concentrate on what they are best at

Question 8

List the advantages of specialisation.

Answer 8

. Produce good quality goods
. Workers become experts
. Use of technology leads to rise in production
. No wastage of time
. Less time taken to train workers
. Sell more leads to an increase in profits

Question 9

List the disadvantages of specialisation.

Answer 9

. Monotony and boredom
. Some workers do not see final goods which may lead to conflicts
. Use of machine leads to loss of talent and unemployment
. Large scale production, same looking goods leads to no originality
. If 1 worker is absent production is affected

Question 10

What is a business?

Answer 10

A business combines resources to produce goods and services to satisfy needs and wants of people, at a profit.

Question 11

What is added value?

Answer 11

Added value is the difference between selling price and cost of bought-in materials.

Question 12

List the importance of added value.

Answer 12

. Allow firm to sell at a higher price - higher profit
. Attract more customers - increased market share
. Helps face competition - product look different than rivals
. Improve image and reputation of firm
. Promotes other products made by firm
. Extend product life cycle

Question 13

How can we add value to goods and services?

Answer 13

. Add new features and functions
. Do promotion or advertising
. Give brand name
. Use attractive packaging
. Give luxury feel to the shop
. Locate firm in prestigious place
Offer presale and aftersale services

Question 14

What is division of labour?

Answer 14

It is the breaking down of complex processes into simpler ones