How to Answer a Paper 2 Question
1 – Definition
2 – Application
3 – Analysis
4 - Evaluation
In relation to XXXX, the YYYY (DEFINITION) is relevant (APPLICATION) to the business by…
This means that … (ANALYSIS)
Therefor …. (BALANCE FOR ANALYSIS)
However …. (BALANCE FOR ANALYSIS)
Based on the evidence provided in the Case Study, I would agree/disagree about XXXX because
…. (Evaluation)
Example:
Q1 – Haltec, a computer company has decided to market the release of a new brand of gaming
mouse. In your opinion, how could they use Product as their unique selling point.
A1 – In relation to the Product, marketing that is aimed at emphasizing the quality of the
product as the best thing about it, this means that Haltec would show the quality in
advertisements like magazine adverts. Therefor the audience would be made aware of the good
points like size, speed, ability. However this may conflict with its price or the place where they
advertise.
Based on the evidence provided in the case study, I would agree that if the product is of good
quality then using Product as the USP would benefit the company more than the other P’s in
marketing as this is what the customers will look for in computer equipment.
Assignment Scenario
• For this project you will need to select a company that produces or
provides a range of products or services that employs at least 10
members of staff with a varied job range.
• Ideally this company should have a production, distribution and sales
side to it so that the staff employed do different work tasks, share
resources among departments and should have rivals.
• It can be within any industry, a shop that sells, a company that
provides help and support packages, a delivery company, a
restaurant or food shop but preferably not a franchise as this makes it
difficult when it comes to rules and regulations that apply.
• You can make up the company as long as you use the above
guidance to set the limits of what the company does and sells. If you
choose a company, it should be one you are familiar with and can
research things like ownership, grants, staffing issues and laws that
apply.
1.1 – Assessment Objectives
Outlines below are the objectives for this
section of the Unit. They should be revised
as part of the exam preparation.
1.1.1 - The purpose and nature of business
activity:
• Concepts of needs, wants, scarcity and
opportunity cost
• Importance of specialisation
• Purpose of business activity
• The concept of adding value and how
added value can be increased
What it is that a
business wants
to achieve and
how they go
about getting
that.
Who makes the
products
companies sell.
What else a
boss wants
from the
company.
Does image
matter
Why do similar
companies sell
more or less of
the same
products.
1.1 – Glossary
These are the technical terms you will need to know for the exam. Add them to your
own Glossary.
Added value – the difference between the selling price of a product and the cost of raw
materials used to make it
Effective demand – demand for a product that is backed up by the ability and willingness to
pay for it
Factors of production – the four categories of resources that are used to produce goods and
services: land, labour, capital, enterprise
Goods- tangible products that can be touched and consumed
Needs – things necessary to sustain life
Opportunity cost – the cost of something in terms of the next best thing
Private sector – the sector of business consisting of businesses owned by private individuals or
groups
Profit – the profit a business makes is the amount by which its income from selling the goods
and services it produces exceeds the costs of producing those goods and services
Public sector – the sector of business consisting of businesses owned by the state
Resources – items of limited availability that can be used in human activity
Services – things other people or businesses do for you
Wants – things chosen to satisfy a need or to make life more enjoyable
1.1.1 – Concepts of Needs and Wants
• What we need and what we want can sometimes be confusing.
• Often you say you need a new Smart Phone or Trainers when in
fact you want it rather than need it.
• Needs – The concept of a ‘Need’ is something that you have
to have to survive, a daily essential. Food, Water, Shelter,
Clothing.
• Wants – Is something that we desire, something that makes
life easier or helps us progress, that does not mean selfish
but can mean more efficient.
• Wants and needs do not have to be material, they do not
have to be objects to possess or use, they can be ideas,
plans, skills.
• For certain things Needs outweigh Wants, a company needs
ingredients or raw materials to make a product and those
items are obvious, dough, cheese, toppings and heat from
an oven to make a pizza and common needs. Is there
something from that list that could be done without, if so, that
is a ‘Want’ not a need.
What it is that a
business wants
to achieve and
how they go
about getting
that.
Who makes the
products
companies sell.
What else a
boss wants
from the
company.
Does image
matter
Why do similar
companies sell
more or less of
the same
products.
1.1.1 – Concepts of Needs and Wants
Needs
Clothing
Food
Shelter
Who makes the
products
companies sell.
Wants
Clothing
Jeans
Party Dresses
Shelter
What it is that a
business wants
to achieve and
how they go
about getting
that.
Food
House
Burger
Apartment
Pizza
What else a
boss wants
from the
company.
Does image
matter
Why do similar
companies sell
more or less of
the same
products.
1.1.1 – Concepts of Needs and Wants
• What is the main difference between needs and
wants?
• For your Business make two lists: the first showing
the things that your Business needs on a day to day
basis to operate, think about how the average
Business Day runs; the second listing things that
your Business would want.
• Identify 3 kinds of businesses or organisations that
supply each item on your lists.
• Select two businesses that you have identified and
explain why you think that they supply the item,
why do you think they specialise in making that
item.
What it is that a
business wants
to achieve and
how they go
about getting
that.
Who makes the
products
companies sell.
What else a
boss wants
from the
company.
Does image
matter
Why do similar
companies sell
more or less of
the same
products.
1.1.1 – Concepts of Needs and Wants - Scarcity
• Some resources such as
air satisfy everybody’s
needs but most
resources are not
plentiful enough for
this.
• Although trees are
renewable you have to
be careful of the
amount of trees cut
down taking into
consideration of the
time it takes for the
replacement tree to
grow.
What else can be
scarce that
affects a
Business
Can scarcity be
temporary.
What alternative
resources can be
used during a
scarcity.
What scarcities
can be predicted
What resources
are guaranteed to
be more scarce in
the future.
How does
Scarcity impact
on Product price
1.1.1 – Concepts of Scarcity - Activity
• Since resources to produce goods and services are scarce a choice
must be made to decide what to produce from them.
• For example, furniture and houses can be made from timber so a
decision needs to be made whether to cultivate trees for
furniture or houses.
• Similarly, if a government spends too much money on building
skills then it will not be able to spend much on training extra
doctors.
• Activity – In groups discuss and prepare a presentation on how a
scarcity of a certain raw material could impact on the production
of your products within a country. You should go beyond the
obvious for this, think of the short, medium and longer term
implications and cascaded impact on reliant businesses.
What else can be
scarce that
affects a
Business
Can scarcity be
temporary.
What alternative
resources can be
used during a
scarcity.
What scarcities
can be predicted
What resources
are guaranteed to
be more scarce in
the future.
How does
Scarcity impact
on Product price
1.1.1 – Concepts of Opportunity Cost
• Opportunity cost of a choice is the value of the product you did not choose
due to cost, where a choice needs to be made between several alternatives
given limited resources. Assuming the best choice is made, it is the "cost"
incurred by not enjoying the benefit that would be had by taking the second
best choice available or the "loss of potential gain from other alternatives
when one alternative is chosen".
• The principle of opportunity cost helps ensure that scarce resources are
used efficiently.
• Opportunity costs are not restricted to financial costs, it also includes the
cost of output forgone, lost time, pleasure or any other benefit that provides
benefits should also be considered opportunity costs.
• If you want an iPod and a pair of shoes but only have enough money to buy
one of them, you will have to choose which one to buy. Both products cost
money and that is their financial cost.
• There is also an opportunity cost – the possibility of buying and enjoying the
use of the other item. If you buy the iPod, the opportunity cost of the iPod is
the shoes. If you buy the shoes, the opportunity cost of the shoes is the iPod
• If a gardener decides to grow carrots, his or her opportunity cost is the
alternative crop that might have been grown instead (potatoes, tomatoes,
pumpkins, etc.)
The range of
products on the
market for one
purpose.
Why companies
would
deliberately
produce inferior
products.
How they
promote these to
get your sales.
Who owns these
companies.
What happens
when a lesser
product becomes
more popular.
1.1.1 – Concepts of Opportunity Cost – Activity 1
• Opportunity cost is not easy to grasp at first but think of a time when you
could not afford something and had to settle for something else, either
because of a lack of money, time or opportunity.
• Answer the following questions:
• What was the situation that stopped you buying or using the primary
product?
1. What alternatives were available?
2. Which alternative did you choose?
3. How much money or time did you save?
4. Did you ever choose that alternative again as a primary choice when the
Opportunity Cost was no loner there?
5. How do you think the company who produced the alternative, lesser,
product marketed their product as the alternative to your choice?
6. Of the 4P’s (Product, Place, Price and Promotion) which did they use to
capture your sales attention?
7. Can you name any product that is sold as “Opportunity Cost” that is
made by the same company as the preferred choice?
8. Why would a company do this?
The range of
products on the
market for one
purpose.
Why companies
would
deliberately
produce inferior
products.
How they
promote these to
get your sales.
Who owns these
companies.
What happens
when a lesser
product becomes
more popular.
1.1.1 – Concepts of Opportunity Cost – Activity 2
• Kuwait Petroleum Corporation (KPC) is one of the world’s largest oil
companies. The company makes products such as petrol and diesel from
crude oil. Crude oil is oil in it’s raw or natural state. It occurs naturally in
deposits within the earth. To produce the petrol that people buy from
garages, KPC must first extract the crude oil from the earth. The company
does this by drilling oil wells, many of which are under the sea. KPC then
transports the crude oil to oil refineries where it is turned into petrol or
other oil products customers want.
• Individually answer the following questions:
1. What does KPC produce?
2. Does KPC produce goods or services?
3. Where can you buy KPC’s product?
4. What is KPC’s product made from?
5. Other than driving, what else could KPC products be used for?
6. Why do you think KPC produces petrol and diesel?
7. What are the Opportunity Cost products?
8. Why do people choose one brand of oil over another when it is
refined to the same quality?
9. Use the concepts of cost, ownership, preference, moral, political and
environmental, why would KPC products, if they are cheaper, not be
the sole market trader.
The range of
products on the
market for one
purpose.
Why companies
would
deliberately
produce inferior
products.
How they
promote these to
get your sales.
Who owns these
companies.
What happens
when a lesser
product becomes
more popular.
1.1.2 – Importance of Specialisation
• Importance of Specialisation – For decades the major companies in the
world made one thing each, that was what they were known for, that
was what they were good at, and that was where their money came
from. Microsoft made operating systems and software. Honda made
cars, Apple made computers, Puma made trainers, Kellogg's made bran
flakes. We could look at the brand names below and say what their
specialised product was:
• Why do companies specialise –
o Created demand that is constant
o Work force that is trained in that production skill
o Marketing, promotion, distribution and client base is in place.
o Results in greater efficiency and productivity. Workers don’t have to
move between jobs. This leads to lower cost of production.
o Time is saved as the workers become for efficient in performing a
particular job, becoming ‘experts’, they commit less mistakes which
leads to less wastage.
o Due to specialisation production level increases which make it possible
to carry out mass production.
The range of
products on the
market for one
purpose.
Why companies
would
deliberately
produce inferior
products.
How they
promote these to
get your sales.
Who owns these
companies.
What happens
when a lesser
product becomes
more popular.
1.1.2 – Importance of Specialisation and Division of Labour
• Specialisation and Division of Labour – This is a separation of work
process into a number of tasks with each task performed by a separate
person or group. However this does not necessarily lead to a decrease in
skills.
• Division of Labour raises outpour per person as staff become good
through constant repetition of a task. This gain helps companies lower
production costs.
• Think of a factory making a car. Having one person making the whole
inside of the car from seats to dashboard to steering etc. would mean
taking a long time over one car in one place. Then consider one person
putting in the seats all day, they will be very good at seat putting by the
end of the day, and a master at it after 10 years.
• Upsides – Faster production levels, getting the right person for the job,
Economies of large scale production, time saving, less training,
inventiveness of task.
• Downsides – Unrewarding and repetitive, people get bored and leave,
little training so the worker is not skilled beyond the task, leads to mass
produced goods and therefor little variety in products, loss of pride,
decline in craftsmanship, reduction of labour mobility.
The range of
products on the
market for one
purpose.
Why companies
would
deliberately
produce inferior
products.
How they
promote these to
get your sales.
Who owns these
companies.
What happens
when a lesser
product becomes
more popular.
1.1.2 – Importance of Specialisation and Division of Labour - Drawbacks
1. Monotony in work - A worker has to do the same small task again and again. Therefore, the
job becomes boring and the worker loses interest in his work. Boredom and monotony create
mental fatigue which ultimately spoils the quality of work.
2. Lack of responsibility - A worker performs only a part of the total job. Therefore, no
individual can be held responsible if anything goes wrong. It is very difficult to fix
responsibility for defect in the product.
3. Greater interdependence - Job, work processes and industries become increasingly inter
dependent due to division of labour. Any problem or defect in one part may cause
disturbance and dislocation in the entire process of production.
4. Loss of job pride - Since every worker produces only a small part of the product, he cannot
take pride in ultimate result. Loss of sense of job satisfaction reduces the involvement of
employees.
5. Reduced mobility of labour - Since every worker specializes in one type of work, he may find
it difficult to procure a job in case of unemployment.
6. Decline in craftsmanship - Division of labour and consequent mechanisation of work reduces
the role of worker in the production process. The tradition of craftsmanship may decline and
the creative instincts of workers may remain unsatisfied.
7. Pollution of environment - Division of labour leads to large scale production in factories. This
leads to pollution of air, water and land. Slums develop near industrial areas.
1.1.2 – Importance of Specialisation and Division of Labour - Advantages
1.
2.
3.
4.
5.
6.
7.
8.
9.
Right person in the right Job - Every worker is assigned the task for which he is best suited. This helps to
provide, opportunities for the best use of natural talents as a person performs the job which he likes he
gets pleasure in work and becoming an expert in performing the job.
Greater Efficiency - Division of labour helps to increase the efficiency of workers due to two reasons. First,
every worker is assigned a job that suits his skills, experience, training and aptitude.
Better Quality of Work - Division of labour not only increases the quantity of work it also improves the
quality of production. Better and modern machines and equipment are used. Better quality products help
to increase the goodwill and profits of business.
Saving of time - Division of labour helps to avoid waste of time and effort caused by changes from one
type of work to another. The worker does not have to shift from one process to another.
Economies of large scale production - Division of labour facilitates mass production. Large scale
production provides economies in the use of resources, such as raw materials, labour, tools etc. Optimum
use of means of production helps to reduce cost of production.
Less learning period - Under division of labour a worker needs to learn only a part of the whole task.
Therefore, lesser time and expenditure is involved in training workers.
Inventions and Innovations - A worker doing the same task again and again tries to find new and better
ways of doing the job. Small and simple parts of a task can easily be done by machines. Thus, division of
labour increases scope for inventions and innovations.
Wider Market - Division of labour makes available cheaper goods of a wide variety. As a result demand for
goods and services increases.
Benefits to society - Society is benefited due to (a) reduced cost on account of large scale production (b)
higher productivity which leads to economic growth (c) employment of unskilled workers and (d) better
quality of goods and services for consumers.
1.1.2 – Importance of Specialisation - Activity
• Specialisation and Division of Labour – This task will allow you to discuss the
basics of:
• Outcomes of "cottage industry" process with "division of labour" process in
manufacturing a product
• Outcomes of "cottage industry" process with "division of labour" process in
manufacturing a product
• Job satisfaction of both processes
• Construct wholly or specifically a product using one of two processes.
• The class will need to be split into teams of three or four with at least one
team working as independent workers and the other teams working as a team
where each person in that team will do one part of the task for everyone. We
will be making a dice using scissors, glue and a pen.
• Group 1 – Independent working, create the dice from start to finish each.
• Group 2:
• Player 1 - Cuts out the dice template for all members.
• Player 2 - Writes the numbers on the dice in elaborate fashion.
• Player 3 - Glues the dice together.
• Player 4 - Optional player, quality control and management of tasks.
• When done you will need to measure how long it took to complete the task,
groups against individuals, and test the quality of the finished product, Teams
against individuals.
• Use the following dice template, print it out for the students to use.
How you are
improving each
time you do the
task.
How you are
reliant on
others to finish
theirs.
How solitary
work is different
from group
work.
How you might
prefer to do the
other tasks.
How it feels to
be judged on
your own or as
a group.
1.1.3 – Purpose of Business Activity
• The purpose of all Businesses is to combine the factors of
production to make products which will satisfy peoples wants.
These products can either be goods – physical items such as cars
and shoes which we can touch and see – or they can be services,
such as insurance, tourism or banking.
• Businesses can be small or large, some businesses employ
thousands of people with operations in many different countries.
• Businesses can be privately owned or state owned, can e owned
by one person or by shareholders.
• Whatever the size and whomever owns them, they all have one
thing in common, they combine factors of production to make
products which satisfy people’s wants.
Labour
Capital
Primary,
Secondary,
Tertiary.
Public, Private,
Shareholder,
PLC.
Services, Sales,
Charity, Nonprofit.
Single shop,
Franchise,
Chain, Web
based.
Factors of Production
Land
Local, National
and Global
Enterprise
Part time, full
time, occasional
or seasonal
staffing.
1.1.3 – Purpose of Business Activity
• This may seem like something that is completely normal to us, we are
used to it, we see it all around us from the corner shops to the big
business names. However in undeveloped societies businesses do not
exist as such. Everyone attempts to do everything for themselves, the
are self-sufficient.
• With their own plot of land and by their own efforts, such as hunting
or barter, they attempt to survive and produce enough for their own
needs. This is a very basic existence and living standards will be very
low.
• By a slow process of specialisation, people began to concentrate on
what they were best at. They then traded those goods for other
goods made by people who have different skills. This is called a
market economy.
• Business activity therefor:
• Combines scarce factors of production to produce goods and
services.
• Produces goods and services which are needed to satisfy the
needs and wants of the population
• Employs people as workers and pays them wages to allow them to
consume products made by other people.
Local, National
and Global
Primary,
Secondary,
Tertiary.
Public, Private,
Shareholder,
PLC.
Services, Sales,
Charity, Nonprofit.
Single shop,
Franchise,
Chain, Web
based.
Part time, full
time, occasional
or seasonal
staffing.
1.1.3 – Purpose of Business Activity
• Using the heading choose research three businesses for each business
field and explain the similarities in the field they operate and the
differences.
Medical
Global
Company 1
Similarities
Differences
National
Company 2
Similarities
Differences
Local
Company 3
Similarities
Differences
Product sales
Manufacturing
Providing a Service
Local, National
and Global
Primary,
Secondary,
Tertiary.
Public, Private,
Shareholder,
PLC.
Services, Sales,
Charity, Nonprofit.
Single shop,
Franchise,
Chain, Web
based.
Part time, full
time, occasional
or seasonal
staffing.
1.1.4 – Adding and Increasing Value
• Added value - The difference between the price of the finished
product/service and the production costs involved in making it.
• This is because of the work carried out increases the value of the
parts and raw materials used. When the product is complete its
value and the price it is sold at is more than the value of the factors
of production used to make the product.
• Therefor added value is the increase in value that a business creates
by undertaking the production process.
• Consider the examples of new cars rolling down the production line
being assembled by robots. The final, completed and shiny new car
that comes off the production line has a value (price) that is more
than the cost of the sum of the parts. Value has been added. Exactly
how much added value is determined by the price that a customer
pays.
• Alternatively, imagine a celebrity chef preparing a meal at his luxury
restaurant. Once the cooking is complete, the meal is being served
and sold for a high price, substantially more than the cost of buying
the ingredients. Value has been added.
How Branding links
to value added
How marketing can
change the image
of a product.
What a LossLeader is and how
this affects value
added when
money is lost in the
sale price.
The loss of
customers through
bad customer
service even when
the product is
good.
How some
companies benefit
the wider
community as a
value added.
1.1.4 – Adding and Increasing Value
• You don’t have to use robots or have the culinary skills of Gordon
Ramsay to “add value”. Businesses can also add value by:
• Building a brand – a reputation for quality, value etc. that customers
are prepared to pay for. Nike trainers sell for much more than Hi-tec,
even though the production costs per pair are similar.
• Delivering excellent service – high quality, attentive personal service
can make the difference between achieving a high price or a medium
one.
• Product features and benefits – additional functionality in different
versions of software can enable a software seller to charge higher
prices, different models of cars are designed to achieve the same
effect.
• Offering convenience – customers will often pay a little more for a
product that they can have straightaway, or which saves them time.
• A business that successfully adds value should find that it is able to
operate profitably. Remember the definition of adding value - where
the selling price is greater than the costs of production.
• Do not confuse added value with profit as they are not the same
How Branding links
to value added
How marketing can
change the image
of a product.
What a LossLeader is and how
this affects value
added when
money is lost in the
sale price.
The loss of
customers through
bad customer
service even when
the product is
good.
How some
companies benefit
the wider
community as a
value added.
1.1.4 – Adding and Increasing Value - Activity
• Discussion – 2 Groups – One for and one against. Even if you are against or
for, you should be able to create an argument for either side for the sake of
arguing.
• Would you be willing to pay a bit more for a loaf that has been made at
home. Can you say the same for clothes, a bicycle, your school bag.
How Branding links
to value added
How marketing can
change the image
of a product.
What a LossLeader is and how
this affects value
added when
money is lost in the
sale price.
The loss of
customers through
bad customer
service even when
the product is
good.
100% Profit to the baker, promotes home
industry, morally right, tastes fresher, paying for
time and effort.
Cheaper, cleaner process, guaranteed quality,
regulated by health board, package sealed, more
people involved in work process.
How some
companies benefit
the wider
community as a
value added.
1.1.4 – Adding and Increasing Value – Tasks - Homework
1. Missing words
Adding value means creating a finished product that is worth more to the
customer than the sum of the parts. At Starbucks, 25p of coffee beans, milk
and flavourings turns into a selling price of £2.50. The £__________of value
added pays for staff, the equipment, the sofas, the rent and still generates a
generous _______________. Adding value is the ultimate goal of Research
and Development teams and marketing departments. It generates the
surplus that pays the bills.
The formula for calculating value added is: ________________ - bought-in
goods and services.
2. Ways to add value (Match the points A – H to the relevant product type
or types)
How Branding links
to value added
How marketing can
change the image
of a product.
What a LossLeader is and how
this affects value
added when
money is lost in the
sale price.
Product type
Ways to add value
Ways to add value
1. Car manufacturing
A. Obtain a
prestigious address
B. Measure up,
then make to fit
C. Offer a short
lead time
D. Add a technical
innovation
E. Carry out the process
faultlessly
F. Excellent design and styling
The loss of
customers through
bad customer
service even when
the product is
good.
G. Impressive, prestige
packaging
H. Use low cost materials
where they’re not visible to the
customer
How some
companies benefit
the wider
community as a
value added.
2. Biscuit production
3. Running a private
hospital
4. Making wedding
dresses
1.1.4 – Adding and Increasing Value – Tasks - Homework
3. Calculations
Tardew Car Dealers buys a 6 year old Fiesta for £700 cash. One car seat is replaced
and a new exhaust fitted - the parts cost £105. After a thorough clean-up inside and
out and a squirt of air freshener inside (materials cost: £5), the Fiesta goes onto the
forecourt at £1,495 and is sold for £1,400 a week later.
I. Calculate the added value
II. Explain why this added value cannot be treated as pure profit.
Strength is a cure for baldness based on herbal medicines. It sells in bottles priced at
£24 that provide enough for two weeks. A full cure is said to take one year, though
the packaging says that only 50% of users will find the cure effective. Jenny Ireland,
the inventor of Strength, has hired a well-known TV and film actor to promote the
product on a series of TV commercials. The production process and costs of Strength
are a closely guarded secret, but the materials themselves cost no more than 30p the same as the packaging. Jenny often refers to the ‘huge overheads’ of running the
business, but with sales of 2 million bottles last year, no wonder she has just bought
herself a Mercedes sports car.
a) Calculate the
I. value added per bottle
II. total value added in the last year
b) Give one justification Jenny might find to defend the high price she charges for
Strength.
How Branding links
to value added
How marketing can
change the image
of a product.
What a LossLeader is and how
this affects value
added when
money is lost in the
sale price.
The loss of
customers through
bad customer
service even when
the product is
good.
How some
companies benefit
the wider
community as a
value added.
1.1.4 – Adding and Increasing Value – Tasks - Homework
4. Outline one example of:
4.1 Added value based upon deception or cleverness (such as Aero adds value by
blowing air through chocolate)
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4.2 Added value based upon a unique selling point (a USP)
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4.3 TV advertisements you have seen recently that seem focused upon adding
value
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How Branding links
to value added
How marketing can
change the image
of a product.
What a LossLeader is and how
this affects value
added when
money is lost in the
sale price.
The loss of
customers through
bad customer
service even when
the product is
good.
How some
companies benefit
the wider
community as a
value added.
1.1.1: Business Activity - Revision Questions
1.
2.
3.
4.
5.
6.
From the following list, decide which items are human
needs and which are wants:
• Luxury House, Shelter, Coca-Cola, Car, Clean Water,
Designer Jeans, Clothing [3]
Explain what is meant by scarcity when referring to the
economic problem [3]
List the 4 factors of production and explain briefly and
explain briefly why each is necessary for production to
take place [8]
Explain, with the aid of an example, what the term
opportunity cost means to a consumer [3]
Give 2 other examples of opportunity cost that would
affect groups other than consumers [2]
Explain what is meant by the term division of labour [2]
1.1.1: Business Activity - Revision Questions
7.
Why is a business likely to increase output if it
adopts division of labour [2]
8. List 4 tasks involved in the making of cakes that
could be given over to different workers through
division of labour [2]
9. State 3 benefits to society of business activity [3]
10. What is meant by added value [2]
11. Identify and explain 2 ways in which a retailer of
clothes could add value to their products. (Hint:
the answer is not to buy more expensive clothes
for the shop as this will not necessarily add
value.) [6]