Unit 1: Business Activity

Question 1

Need

Answer 1

good or service essential for living.

Question 2

Want

Answer 2

good or service which people would like to have but which is not essential for living. The function of Marketing is to turn the wants into needs.

Question 3

Economic Problem

Answer 3

there are unlimited wants but limited resources to satisfy them. Creates Scarcity. It is created by nature, by the human’s desires to have everything.

Question 4

Scarcity

Answer 4

lack of sufficient products to fulfill the total wants of the population. Caused by shortage of factors of production. Created by businesses attempt to sell everything.

Question 5

Factor of production

Answer 5

resources needed to produce goods or services. There are 4:
• Capital: finance, machinery and equipment. All forms of income.
• Enterprise: skill and risk taking ability of the person who brings the other factors of production together. Entrepreneurs.
• Labour: number of people available to make products. Proletarian effort of workers. Proletarian: anyone who doesn’t have goods to sell so they sell their work
• Land: natural resources, includes fields, forests, oil, gas, metals and other minerals

Question 6

Opportunity Cost

Answer 6

next best alternative given up by choosing another item. Next best alternative that must be foregone.

Question 7

Specialisation

Answer 7

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

Question 8

Division of Labour

Answer 8

When the production is divided many times so that the costs and time of production are lower. Goes hand in hand with Specialization.
Advantages: increased efficiency and output. Less time wasted moving from one workbench to another.
Disadvantages: worker can become bored. If one worker is absent and no one else can do the job, production might be stopped.

Question 9

Business

Answer 9

combines scarce factors of production to produce goods and services, which satisfy needs and wants of the population, and employs people to do it.

Question 10

Added value

Answer 10

difference between the selling price of a product and the cost of bought in materials and components. If value is not added: other costs cannot be paid and no profit is made. How to increase it:
• Increase selling price and keep the cost of materials the same. When businesses try to create a higher quality image. Consumers must be convinced by this image. Other costs might increase when trying to create this image.
• Reduce the costs of materials and keep the same price. Result in higher added value. Might reduce the quality of the product.