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BUSINESS
EXAM STYLE QUESTIONS
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Chapter#01-Business Activity 1.Gowri plans to start up her own business using her savings. She wants to produce fashion clothes for women. She is a very good clothes designer but she does not like stitching clothes together. Two friends have offered to help Gowri. Abha is an experienced material or fabric cutter – she can cut lengths of material or fabric for clothes with very little wastage. Aditi is quick at sewing fabric together.
a) Define Business? Ans: Businesses combine factors of production to make products, goods and services which satisfy people’s wants. b) Identify two factors of production that Gowri will need for her new business. Ans: Labour and capital. c) Outline two possible opportunity costs that Gowri may have from her decision to start her own business.
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Ans: Gowri will have to choose between stitching her designs herself or using Aditi to increase her business efficiency so Aditi becomes the first opportunity cost. d) Explain one advantage and one disadvantage to Gowri’s business of using division of labour in making clothes. Ans: One advantage of using division of labour in making Gowri’s clothes would be specialization to increase efficiency and one disadvantage would be decreased efficiency if Abha or Aditi got ill and their expertise was unable to send. e) Do you think that Gowri’s business will be able to sell all of the clothes that it makes? Justify your answer. Ans: Gowri will only be able to sell her clothes if she offers customers a made to measure service thereby ensuring that every order results in safe.
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2.Mohammed owns a bakery. He makes bread and cakes. He employs three workers who help him mix the dough for the bread and cakes, put the dough into tins, bake the bread and cakes, and serve customers. Mohammed has calculated that the ‘added value’ of his business is low. His customers complain when he tries to increase his prices. ‘We can buy the same bread and cakes at lower prices,’ they tell him.
a) Define added value? Ans: Added value is the difference between the selling price of a product and the cost of bought-in materials and components. b) Identify the opportunity cost to Mohammed of buying a new oven. Ans: Mohammed chooses to buy an oven rather than spending his money of better quality baking equipment. c) Outline two benefits to Mohammed’s business of all of his workers being able to do all of the jobs in the bakery. 4
Ans: Mohammed will save the additional cost of payment to businesses that do other jobs for him. He saves money when he only has to pay three workers instead of four or more. d) Explain two ways in which Mohammed could increase the value added of his bakery business. Ans: Mohammed has to increase the speed he delivers the kind of value people are willing for and to offer better quality at the same price. e) A friend told Mohammed, ‘Your business would be more successful if you only served in the shop and let your workers make the bread and cakes.’ Do you agree? Justify your answer. Ans: Yes it makes Mohammed’s business more successful and in this way he will pay more attention to their customer.
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Chapter#02-Classification of businesses 1 Ade’s Engineering Company (AEC) makes parts for cars and trucks. These are sold to car manufacturers in many countries. The parts include metal brake components and rubber seals to fit around windows. AEC operates in Country X, which, until a few years ago, had an economy dominated by agriculture and coal mining. Over the last 20 years the relative importance of the primary sector has declined. To be successful AEC requires natural resources to make car parts and services provided by other businesses. Consumer incomes are rising rapidly in Country X.
a) Define primary sector? Ans: Primary sector is a business that uses natural resources to produce raw materials used by other businesses. b) Identify two examples of services that a business such as AEC requires. Ans: Transport is a service needed by AEC, to deliver its car parts. Insurance is another service AEC will require, to protect the factory and its contents in case of an emergency or disaster. 6
c) Outline two reasons why a business such as AEC could not be successful without other firms providing natural resources. Ans: Reason 1: AEC needs steel to make its car parts and steel production requires natural resources like coal and iron ore. Without these natural resources, AEC could not successfully make car parts from steel. Reason 2: AEC needs rubber to make its seals too. Oil is needed to produce rubber and, like coal and iron ore, oil is a natural resource. Without oil, AEC would have no rubber for seals.
d) Explain two likely reasons why the relative importance of the primary sector of Country X’s economy has declined. Ans: Natural resources are declining over time + coal reserves, especially, are running out. This means that primary sector production will fall + become less important to X’s economy. e) A government minister in Country X recently said: ‘The secondary sector of industry will always be more important than the tertiary sector to our economy.’ Do you agree with this view? Justify your answer 7
Ans: The secondary sector of industry manufactures goods using raw materials provided by the primary sector of industry. An example is a car manufacturer using steel from natural resources like coal + iron ore. The tertiary sector of industry provides commercial services to consumers + other sectors of industry. An example of this is a freight company making deliveries for secondary sector manufacturers.
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2.The government of Country Y owns and controls many businesses. ‘The public sector always produces goods and services more efficiently than privately owned businesses,’ a government minister recently said. Other ministers disagree and want to privatise many state-owned businesses. The private sector businesses in Country Y produce 55 per cent of total output – mainly in services such as transport, tourism and finance. The secondary sector of industry produces 35 per cent of total output. a) Define public sector? Ans: The public sector is the part of the economy composed of both public services and public enterprises.
b) Identify two industries in the secondary sector.
Ans: The secondary sector includes secondary processing of raw materials, food manufacturing, textile manufacturing and industry.
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