chapter 1 - business activity

Question 1

definition of:

need

Answer 1

a good or service that is essential for living

Question 2

definition of want:

want

Answer 2

a good or service that is not essential for living but satisfies people’s desires

Question 3

definition of:

economic problem

Answer 3

there are limited resources to produce goods and services to satisfy the unlimited needs and wants, hence creates scarcity

Question 4

definition of:

factors of production

Answer 4

resources required to produce goods and services such as land, labour, capital and enterprise

Question 5

definition of:

scarcity

Answer 5

the lack of sufficient products to fulfil the unlimited wants of the population

Question 6

definition of:

opportunity cost

Answer 6

cost of the next best opportunity forgone when making decision

Question 7

definition of:

• land
• labour
• capital
• enterprise

Answer 7

• natural resources available for production of goods and services
• human input in the production process
• money invested into a business by owners
• the skill and risk-taking ability of the person who brings other factors of production together to produce a good or service

Question 8

definition of:
specialisation

advantages and disadvantages?

Answer 8

-when a business or a person concentrates on what they are best at

advantages:
* workers are trained- efficiency and output increases
* less time is wasted moving from one workbench to another

disadvantages:

• workers can become bored
• if one is absent, production disrupted

Question 9

definition of:

division of labour

Answer 9

when the production process is split up into different tasks and each worker performs one of these tasks

Question 10

definition of:

business

Answer 10

combine factors of production to make products and services which satisfy people’s wants

Question 11

definition of:
added value

what are the added values?

why is it important?

how to increase added value?

Answer 11

-the difference between the selling price and the
cost of bought-in materials and components

• quality, convenience, unique selling point, design, branding, speed
• to make profits and pay other costs (labour, management expenses)
• increase selling price but keep cost of materials same; create higher quality image
• reduce cost but keep selling price same