Understanding Business Activity

Question 1

What is the difference between needs and wants?

Answer 1

Needs are essential for survival (e.g. food, water). Wants are things we’d like but can live without (e.g. phone, TV).

Question 2

What is the Economic Problem?

Answer 2

Unlimited wants + limited resources = we must make choices.

Question 3

What is opportunity cost?

Answer 3

The next best thing you give up when you make a choice.

Question 4

What are the 4 factors of production?

Answer 4

Land, Labour, Capital, Enterprise.

Question 5

What does an entrepreneur do?

Answer 5

Takes risks, makes decisions, and runs the business.

Question 6

What is specialisation?

Answer 6

When people or businesses focus on one task they do well.

Question 7

What is division of labour?

Answer 7

Work is split into tasks, and each worker does one task.

Question 8

Give one advantage of specialisation.

Answer 8

Faster production, better quality, more efficiency.

Question 9

What is added value?

Answer 9

Selling price – cost of raw materials.

Question 10

How can a business increase added value?

Answer 10

Raise the selling price or reduce material cost.

Question 11

What are the three business sectors?

Answer 11

Primary (natural resources), Secondary (manufacturing), Tertiary (services).

Question 12

What is a mixed economy?

Answer 12

An economy with both private and public sector businesses.

Question 13

What is privatisation?

Answer 13

Selling a government-owned business to the private sector.

Question 14

What are 2 pros and cons of being an entrepreneur?

Answer 14

✅ Own boss, keep profits
❌ Risk of failure, stress

Question 15

Why is a business plan important?

Answer 15

Helps get loans and reduces risk through careful planning.

Question 16

How can you measure the size of a business?

Answer 16

By number of employees, sales, output, or capital employed.

Question 17

What is internal growth?

Answer 17

Expanding by doing more (e.g. opening a new branch).

Question 18

What is external growth?

Answer 18

Merging with or taking over another business.

Question 19

What is horizontal integration?

Answer 19

When two businesses at the same stage join (e.g. two shops).

Question 20

What is vertical integration?

Answer 20

When businesses at different stages join (e.g. factory + shop).

Question 21

What is a conglomerate merger?

Answer 21

Merger of businesses in different industries (e.g. chocolate + camera).

Question 22

Why do some businesses stay small?

Answer 22

Limited money, small market, or owner’s choice.

Question 23

Why do businesses fail?

Answer 23

Poor planning, bad money management, strong competition.

Question 24

What is a sole trader?

Answer 24

A business owned and run by one person.

Question 25

What is a partnership?

Answer 25

A business owned by 2 or more people.

Question 26

What is a private limited company (LTD)?

Answer 26

Business with shareholders, but shares aren’t sold to the public.

Question 27

What is a public limited company (PLC)?

Answer 27

Shares sold to the public on the stock exchange.

Question 28

What is a franchise?

Answer 28

When someone buys the right to use a brand (e.g. Subway).

Question 29

What is a joint venture?

Answer 29

Two businesses work together on a project.

Question 30

What is a public corporation?

Answer 30

A business owned by the government to provide services.

Question 31

What are business objectives?

Answer 31

Targets a business works to achieve (e.g. profit, growth).

Question 32

What is market share?

Answer 32

The % of total sales a business has in its industry.

Question 33

What is a social enterprise?

Answer 33

A business with social and environmental goals.

Question 34

Who are stakeholders?

Answer 34

People/groups affected by the business (e.g. customers, workers, government).

Question 35

Why do stakeholders sometimes disagree?

Answer 35

They have different goals (e.g. workers want high wages, customers want low prices).