TEMPORARY - Mock test

Question 1

Factors that effect the demand of a product

Answer 1

• price
• substitutes
• changes in consumer incomes
• tastes
• advertising/branding
• demographics (changes in population)
• external shocks (outside of business control)
• seasonality

Question 2

factors affecting the supply

Answer 2

• changes in production costs
• introduction of new tech (lower unit cost = supply rise)
• indirect taxes (increased taxes = higher cost = supply fall)
• government subsidies (opposite of indirect tax)
• external shocks

Question 3

if demand is higher than supply:

Answer 3

prices will rise to make the demand go back to the equilibrium level of supply = demand

Question 4

if supply is higher than demand:

Answer 4

price will fall to attract customers, which increases demand and will create an equilibrium between supply and demand

Question 5

what do supply and demand diagrams show?

Answer 5

they show how much of a product would be demanded/ businesses are willing to supply at different price levels

Question 6

increase in supply or demand

Answer 6

line moves right

Question 7

decrease in supply or demand

Answer 7

line moves left

Question 8

where do the lines go?

Answer 8

within the X the top label is supply and bottom is demand

Question 9

What is capacity utilisation?

Answer 9

is the proportion of maximum capacity being used by the business. businesses try to operate to full capacity to avoid waist and boost profitability.

Question 10

capacity utilisation formula

Answer 10

(expressed as a percentage)

capacity utilisation = (current output/max output) x100

Question 11

Implications of under-utilisation

Answer 11

Fixed costs per unit will be higher. Which can result in

-job loss fears, which hurts motivation

Question 12

Implications of over-utilisation

Answer 12

• they may not be able to accept any new orders because there current capacity won’t be able to hold it. This could mean turning down customers to rivals
• little time to carry out maintenance or train staff if the demand for a product is really high

Question 13

Ways of improving capacity utilisation

Answer 13

• increase current output (by using methods that boost sales volume like cutting selling price)
• reduce maximum capacity (this reduces fixed costs - involves selling off assets or cutting staff)

Question 14

why do businesses use sources of finance

Answer 14

There comes circumstances where businesses need to raise finance. E.g when starting up, growing or expanding, dealing with cash flow, increased production costs.

Question 15

Internal sources - safest method of financing as if the investment were to fail, the business won’t be left in large debt.

Answer 15

• owners capital
• Retained profit (not for start up investment)
• sales of assets - Established businesses sell off unwanted assets

Question 16

External sources - require some sort of return

Answer 16

• family + friends (limited to small business contexts)
• Banks - loans e.g (hard to get at reasonable rate)
• peer to peer funding - investors from websites (rare)
• Business angels - rich investors who want a stake in the business in trade for their skills and expertise (for early stages)
• Crowdfunding - allows multiple investors to invest in one business (for startups)
• Other businesses - firms seek smaller businesses to provide finance for return of shareholding

Question 17

Production methods

Answer 17

certain methods of production differ between different kinds of businesses and the products they sell.

• Job production
• Batch production
• flow production
• cell production

Question 18

Job production (advantages/disadvantages)

Answer 18

Job is the making of one-off items tailored to customer needs
AD - can charge higher prices
DIS - high unit costs, staff costs (skilled workers)

Question 19

Batch production (advantages/disadvantages)

Answer 19

makes a group of products at one time (allows some variation yet specialisation) - e.g same shoes, different sizes
AD - speedier than job production + allows variation
DIS -machinery may be required - this increases costs

Question 20

Flow production (advantages/disadvantage)

Answer 20

continuous production of a single product
AD - cost effective, Huge volumes allow huge demand in mass markets to be met as well as lower unit costs
DIS - identical products, high unit costs to start off with

Question 21

Marketing mix

Answer 21

the general approach to marketing used by a business
4 Ps
Product - what you sell
Price - how much are you charging and is it affective?
Place - where do you promote, is it able to reach your Target marker
Promotion - how do your customers find you

Question 22

Ansoffs model

Answer 22

ansoffs matrix can link into the marketing mix in the product development area which involves marketing and distributing your existing product in a new market, this is seen as more high risk but can boost sales and gain a new customer base

Question 23

Sales revenue -

Answer 23

is the value of the output sold by a business. It may be calculated for a specific time period like day, week or moths. It can also be calculated for individual products when businesses sell a range of products

Question 24

Quality management

Answer 24

when consumers buy a product, they expect it to be of a certain standard
At a minimum level, customers expect the product to be fit to perform the purpose for which it was bought.
In some businesses, the quality of their products is their point of differentiation.

Question 25

what is total quality management (TQM)

Answer 25

More of a way of encouraging staff to think about the business than managing the quality of their product.
It trains them to see the importance of quality and ‘getting it right the first time’.

Question 26

TQM disadvantages/ advantages

Answer 26

AD - once all staff think about quality, it should show through all areas of work - design, manufacture and after sales service. And will be deeply rooted the firms culture
DIS - can be costly with extensive training courses.
lacks a clear concrete program so staff may disregard it as unnecessary

Question 27

Boosting sales revenue

Answer 27

• lowering production costs
• entering new markets
• widen product range
• lower prices
• pricing strategies

Question 28

sales revenue formula

Answer 28

sales volume x price