(Unit 1) Chapter 1: Business Activity

Question 1

Examples of needs

Answer 1

• Water
• Food
• Shelter
• Clothing

Question 2

Examples of wants

Answer 2

• Mobile phones
• Cars
• Holidays

Question 3

What are the 4 factors of production?

Answer 3

• Land
• Labour
• Capital
• Entrepreneur

Question 4

Land

Answer 4

All natural resources such as minerals, ores, fields, oil and forests.

Question 5

Labour

Answer 5

The number of people available to work.

Question 6

Capital

Answer 6

Machinery, equipment and finance needed for production of goods and services.

Question 7

Entrepreneur

Answer 7

People prepared to take the risk of setting up businesses - they are known as entrepreneurs.

Question 8

How is scarcity caused?

Answer 8

• There aren’t enough factors of production in the world
• It’s not possible to make all the goods and services needed or wanted by the world’s population
• In other words, the unlimited wants of consumers can’t be satisfied because the factors of production required to produce the goods and services to meet those wants are limited
• This causes scarcity

Question 9

Opportunity cost examples

Answer 9

• You have enough money to buy the latest CD released from your favourite singer, or you can use the money to buy a Business Studies revision textbook
• You can either go to the cinema with friends or spend the money on a new computer game
• Whichever decision you make will mean that you’ll have to give up the chance of having the other

Question 10

Opportunity cost examples in businesses and the government

Answer 10

• A business might have to choose between using resources on an advertising campaign, or on a training programme for its employees
• A government might have to choose between building a new school or a new hospital

Question 11

What are the advantages of specialisation?

Answer 11

• Businesses are far more efficient
• Reduces the cost of production
• Benefits consumers by providing more goods and services at lower prices than before specialisation took place

Question 12

What are the different types of goods and service businesses produce?

Answer 12

• Consumer goods
• Consumer services
• Capital goods

Question 13

Durable consumer goods

Answer 13

Durable consumer goods can be used over and over again, for example televisions, computers, cars, tables and chairs.

Question 14

Non-durable consumer goods

Answer 14

Non-durable consumer goods can only be used once, for example food and drink.

Question 15

What is ‘adding value’?

Answer 15

This is when a business takes raw materials and turns them into a good or service which it sells to customers at a price greater than the cost of the raw materials used in production.

Question 16

Ways businesses can add value

Answer 16

• Branding
• Excellent service quality
• Product features
• Convenience

Question 17

Branding

Answer 17

• Companies spend huge sums of money on advertising and promotional activities
• They do this to build and then maintain their brand
• Branding increases added value because people want to or feel they should buy the item from this particular company

Question 18

Excellent service quality

Answer 18

• In some industries, providing a high-quality, personalised service can be the difference between being able to charge a high or low price
• The price of a made-to-measure suit will be higher than the price of a ready-made suit
• Personalised service adds value

Question 19

Product features

Answer 19

• Products that have more features and functions than similars products on the market will allow the producer to charge a higher price
• The mobile phone market is a very good example of how features and functions are used to increase the product’s added value

Question 20

Convenience

Answer 20

Many consumers have busy lives and will pay a higher price for goods and services which they can have immediately or save them time e.g. ready meals