Business activity Exam Questions

Needs are essential for survival, such as food and shelter, while wants are desires for non-essential items, such as luxury goods. Mark allocation: 1 mark for each difference.

Opportunity cost is the value of the next best alternative foregone when making a decision. Mark allocation: 1 mark for the definition, 1 mark for an example.

Specialisation is important because it can increase efficiency, reduce costs, and improve the quality of goods or services. Mark allocation: 1 mark for each reason.

A business adds value to a product by transforming raw materials into finished goods or services that customers are willing to pay more for. This can be achieved through processes such as design, production, marketing, and customer service. For example, a furniture maker adds value by designing and crafting a chair from raw wood, making it more valuable than the wood alone. Mark allocation: 1 mark for the definition of adding value, 1 mark for each process mentioned, 1 mark for the example.

The purpose of business activity is to create value for customers, shareholders, and other stakeholders. This can be achieved through various objectives, such as making a profit, growing the business, or providing social benefits. For example, a business might aim to increase market share, improve product quality, or reduce costs to achieve its objectives. The purpose of a business can change over time as it responds to changes in the market or the needs of its stakeholders. Mark allocation: 1 mark for the definition of the purpose of business activity, 1 mark for each objective mentioned, 1 mark for the example, 1 mark for the explanation of how the purpose can change.

The opportunity cost of investing in new machinery is the revenue that could have been generated by investing in training employees, which is £10,500. Mark allocation: 1 mark for identifying the two options, 1 mark for calculating the revenue from each option, 1 mark for identifying the option with the higher revenue, 1 mark for calculating the opportunity cost, 1 mark for the final answer.

Adding value is important in business because it allows a business to charge a higher price for its products or services, which can increase its profitability. It can also help a business to differentiate itself from its competitors, attract and retain customers, and build a strong brand. However, adding value can also be costly and time-consuming, and it may not always be possible to charge a higher price for the added value. Therefore, businesses must carefully consider the costs and benefits of adding value before making decisions about how to add value to their products or services. Mark allocation: 1 mark for the definition of adding value, 1 mark for each benefit of adding value mentioned, 1 mark for each limitation of adding value mentioned, 1 mark for the explanation of how businesses must consider the costs and benefits, 1 mark for the final evaluation.

The purpose of a business can be influenced by various factors, including the needs and wants of its customers, the objectives of its shareholders, the expectations of its employees, and the regulations and laws of the government. For example, a business might aim to make a profit to satisfy its shareholders, but it may also aim to provide high-quality products or services to meet the needs of its customers. The purpose of a business can also be influenced by changes in the market, such as new competitors or changes in customer preferences. Therefore, businesses must regularly review and adapt their purpose to ensure that it aligns with the needs and expectations of their stakeholders and the market. Mark allocation: 1 mark for each factor mentioned, 1 mark for each example mentioned, 1 mark for the explanation of how the purpose can be influenced by changes in the market, 1 mark for the explanation of how businesses must regularly review and adapt their purpose, 1 mark for the final discussion.