1.5.5 Business Choices

Question 1

Opportunity cost definition

Answer 1

The benefit of the next best alternative that is missed out on when making a decision
E.g. opportunity cost of spending £1 on a coke- spend £1 of a can of Fanta instead of a £1 bar of chocolate

Question 2

some of the benefits a business could sacrifice by choosing a different option

Answer 2

could have:

• strengthened the brand name
• extended the product life cycle
• bought in lots of revenue
• increased market share

Question 3

choices and trade-offs

Answer 3

when a business makes a choice they face and trade-off
e.g. a business may have to decide between spending on training for staff to improve customer service or investing in an advertising campaign to attract new customers

Question 4

trade-off definition

Answer 4

where a business has to make a choice between 2 options, gaining less of the option they don’t choose. A trade off creates an opportunity cost.