Chapter 1

Question 1

Characteristics of the business world

Answer 1

• Complex system of individuals and business organisations
• In a market economy
• Transforming resources to meet needs
• Offered in exchange for profit

Question 2

Four elements of business

Answer 2

People - human activities, people involved at all stages
Production - transformation of resources
Exchange - produce/service to exchange for money
Profit - reward for meeting needs, fair/sustainable

Question 3

Definition of business

Answer 3

Means by which society aims to satisfy needs through the means of production and improve the standard of living by creating wealth

Question 4

Market economy

Answer 4

Individuals decide what to produce, how to produce and at what price to sell
Small and large businesses use resources to meet needs of inhabitants to form industries

Question 5

Formal and informal sectors

Answer 5

As market economies develop dependence shifts from mining and agriculture towards services

Question 6

Are informal businesses part of the formal economy

Answer 6

No.
Informal businesses are not registered and many people involved in these enterprises live primarily on a subsistence/survival basis

Question 7

Do developed and developing businesses contribute to the economy and employment differently

Answer 7

Yes they contribute differently

Question 8

How do businesses contribute to society

Answer 8

• Creates wealth
• Catalyst for economic growth
• High standard of living in developed countries
• Indirectly provide technological innovation, research and development, improvement to infrastructure

Question 9

How do businesses contribute to safety and environmental changes

Answer 9

• Education
• Development of human resources
• Arts
• Conservation
• Sport
• Activities thay improve the quality of life in a community

Question 10

What is the core of sustainability

Answer 10

The way the business world and society depend on and influence each other

Question 11

What are the five themes of sustainability under CSR

Answer 11

1. Social responsibility
2. Employment equity
3. Business ethics
4. Consumerism
5. Environmental sustainability

Question 12

What is corporate citizenship

Answer 12

A businesses responsibility to behave as responsible citizens

Question 13

Elaborate on social responsibility

(Theme of sustainability)

Answer 13

Insistence of society to regulate and restrict malpractice
Measured on employment equity and contribution to the economy
- provision of safe workplace
- provision of housing
- concern over health
- involvement in community issues
- environmental awareness
- empowerment of PDIs
Businesses contribute directly = CSI

Question 14

Elaborate on employment equity

Answer 14

Business at all levels should resemble community. Aim for equal employment opportunity
Employment Equity Act 1998
Eliminate discrimination, ensure employment equity, diverse workplace
Skilled managers are needed for economic growth

Question 15

Elaborate on business ethics

Answer 15

Relates to social responsibility except the focus is on the behavior of management and executives
Managers need to have high ethical standards
Codes of conduct provide guidelines

Question 16

Elaborate on consumerism

Answer 16

Social forces that protect consumers against unsafe products and malpractice by exerting moral and economic pressure on businesses
South African National Consumer Union and Consumer Protection Act of 2008
CPA forces producers to take full responsibility to ensure safety

Question 17

Elaborate on environmental sustainability

Answer 17

Stakeholder activism/legislation forcing businesses to take the environment into consideration
Frequently responsible for pollution and damage

Question 18

What does sustainable development refer to

Answer 18

Refers to the economic principle and how resources are used

Question 19

What are the levels of Maslows Hierarchy

Answer 19

Self-actualisation
Esteem
Social
Safety (body and mind)
Physiological

Question 20

Explain the factor of production:

Natural resources

Answer 20

Agricultural land, industrial sites, residential stands, minerals, metals, forests, water and resources provided by nature
Supply can’t be increased
Human effort is needed to create a need satisfying product making resources scarcer

Question 21

Explain the factor of production:

Human resources

Answer 21

Physical/mental talents/skills of people employed to create products and services
Size of labour force is determined by size of population, education level, training, proportion of women in labour force and retirement age
For manufacturing to have value labour force must be trained for certain periods and certain skill levels
Combination of skills is important so natural/financial resources can be used

Question 22

Explain the factor of production:

Capital

Answer 22

Produced not for human consumption, produced for use in production of further consumer products
Buildings, machinery, cash registers, computers
Usually have a long working life
Scarcity factor - takes years to build up capital; owners remunerated through interest/rent

Question 23

Explain the factor of production:

Entrepreneurship

Answer 23

Collective capacity of entrepreneurs
Individuals who accept the risks involved in providing produts/service
Scarcity is that not everyone is willing to take the needed risk/has the ability to manage
Creative change/growth

Question 24

Explain the basics of the need satisfaction cycle

Answer 24

Society has unlimited wants/needs but scarce resources
Community chooses an economic system to best satisfy their needs
Economic system is subject to the economic principle

Question 25

What is the economic principle

Answer 25

How to ensure the highest need satisfaction with scarce resources

Question 26

What choices need to be made under the economic principle

Answer 26

Which products/services should be produced in what amounts Who should produce the products/services How should the products/services be made and with what resources Who are the products/services made for

Question 27

# Explain the economic system: Free market

Answer 27

Little government regulation Regulated through supply and demand Extreme highs and lows Choice and competition No safety nets Social ills "Dog eat dog" Many rights Increased productivity

Question 28

# Explain the economic system: Social

Answer 28

Government controls key industries (everyone has rights to the same amount) Other industries are open Safety nets

Question 29

# Explain the economic system: Command

Answer 29

Governemnt controlled Low productivity/standard of living

Question 30

# Explain the economic system: Mixed economies

Answer 30

None of the 3 main types exist in a pure form Dominant systems incorporate aspects of other systems

Question 31

# Role of government according to: Conservatives

Answer 31

Extremely limited This leads to: * economic fluctuations, unemployment, inflation * economic inequality * monopolies - inefficient resource use * deal poorly with side effects such as pollution * certain goods can't be provided such as defense

Question 32

# Role of government according to: Liberals

Answer 32

Should be involved, overcome limitations and encourage growth, stability, equity in distribution of income This leads to: * provide goods/services not provided * regulate private economic activity * protection of natural resources * preventing pollution * restricting monopolistic practices * protection of consumers * promote exports/small businesses

Question 33

Types of need satisfying institutions

Answer 33

Business organisations Government organisations Non-profit seeking organisations

Question 34

# Need satisfying institution: Business organisation

Answer 34

Complex system of interdependent organisations which use the resources of a country to satisfy the country's needs at the risk of loss/in pursuit of profit By meeting needs the business organisation solves the economic problem Business organisations: private need-satisfying institutions of a market economy that accept risks in pursuit of profit by offering products/services on the market to consumers

Question 35

# Need satisfying institution: Government organisation

Answer 35

Principle of a free market economy is minimal government involvement in market mechanisms, confine itself to the protection/creation of collective non-profit seeking facilities/service such as healthcare Government departments responsible for state functions can be seen as need satisfying institutions. Can be seen as public administration State-owned enterprises offer services/products for profit

Question 36

# Need satisfying institution: Non-profit-seeking organisations

Answer 36

Need satisfying institutions which offer services (maybe products) not provided by government or business organisations Do not set profit making goals, function on the same model as business organisations of surplus income or at least balancing income/expenses