Business Choices (1.5.5)

Question 1

What is Opportunity Cost?

Answer 1

The value of the next best alterative you give up when you make a decision. If you want more of Thing A the next best alternative is the amount of Thing B that is given up. This is due to the problem of scarcity, choices have to be made about how to best allocate limited resources amongst competing wants and needs.

Question 2

What is a Trade Off?

Answer 2

When two outcomes cant be achieved at the same time as more of one thing leads to less of another. Having more of one thing may mean having less of another.

Question 3

What limits a trade off? (4 Factors)

Answer 3

-Time
-Money
-resources
-Skills/ Experience

Question 4

What’s the main problem of a Trade Off?

Answer 4

Could be something unethical so you may have a moral dilemma. e.g. harming the environment because its cheaper and easier. This could affect a businesses brand image.

Question 5

What are examples of potential trade-offs?

Answer 5

1. Product- choosing between spending more money upgrading an existing product may result in loss of next best alternative which could be R+ D on a new product.
2. Market research- By skipping MR it can help business get its product to the market quicker but its products may not have the desired features/quality to be desired/successful
3. Promotional Methods- If business spends promotion money on an elite athlete then this can mean giving up other forms of promotion such as radio advertising