Unit 1 : Business Activity

Question 1

Define Needs

Answer 1

goods or services that are essential for survival

Question 2

Define Wants

Answer 2

goods or services customers that customers desire but are not essential for survival

Question 3

Define Economic Problem

Answer 3

unlimited wants but limited resources to satisfy the wants

Question 4

Scarcity

Answer 4

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

Question 5

Name the 4 factors of production

Answer 5

land, labour, capital and enterprise

Question 6

Define Factors of Production

Answer 6

resources that are needed to produce goods or services

Question 7

Define Land (Factor of Production)

Answer 7

any natural resource used in production

Question 8

Define Labour (Factor of Production)

Answer 8

mental and physical efforts of employees

Question 9

Define Capital (Factor of Production)

Answer 9

finance, machinery and equipment needed for the manufacture of goods and services

Question 10

Define Enterprise (Factors of Production)

Answer 10

individual’s who manage/coordinate the three other factors, make decisions and take risks

Question 11

Define Opportunity Cost

Answer 11

the next best alternative given up by choosing another item

Question 12

Define Specialisation

Answer 12

when people and businesses focus on what they are best at

Question 13

Define Division of Labour

Answer 13

when production is split into different tasks, and each worker performs one of these tasks. (form of specialisation)

Question 14

Give 3 reasons why specialisation is common

Answer 14

1. specialised machinery and technology is widely available
2. increasing competition is making businesses keep costs low
3. higher living standards can come from being specialised

Question 15

Give 4 Advantages of Specialisation

Answer 15

1. workers are trained in one task and specialise in this, increasing productivity and effectivity
2. specialisation with division of labour will result in better quality output
3. increase in effciency will lead to economies of scale
4. workers become more skilled and experienced, reducing waste of time and resources

Question 16

Give 3 Disadvantages of specialisation

Answer 16

1. repetitive tasks can cause boredom/burnout for employees, reducing motivation and job efficiency
2. if a worker is absent, production is disrupted, causing waste of time and resources, and less output and efficiency
3. specialised workers require higher wages and training current employees increases costs.

Question 17

What is the Purpose of Business Activity

Answer 17

businesses combine the scarce factors of production to produce goods/services to satisfy people’s needs and wants

Question 18

Define Added Value

Answer 18

the difference between the cost of purchasing bought-in material and the price of the finished goods

Question 19

What is the formula for Added Value

Answer 19

selling price - total cost

Question 20

What are 2 Advantages of Added Value

Answer 20

1. helps in possibly making a profit if other costs come to a total that is less than the added value
2. it can be used to pay for other expenses

Question 21

What is a Disadvantage of Added Value

Answer 21

increasing the product’s price may lead to lower sales and even profit.

Question 22

What are 2 ways of Increasing Added Value

Answer 22

1. increasing the selling price but keeping the costs of the materials the same to create a higher quality image for the good/service to convince the customers.
2. reducing the cost of the materials but keeping the price the same.

Question 23

Define Intangible (Service characteristic)

Answer 23

a service cannot be seen, smelled, heard or touched prior to purchase

Question 24

Define Perishable (Service characteristic)

Answer 24

a service can’t be stored like a physical good. If it’s not delivered, it is lost or does not exist.

Question 25

Define Inseperable (Service characteristic)

Answer 25

a service is performed and consumed at the same time

Question 26

Define Variable (Service characteristic)

Answer 26

each time a service is performed it will be performed in a different way