Ib 1.1 - Nature of Business Activity
Review Questions 1.1 1. What is a ‘business’?
A business is a decision-making organisation involved in the process of using inputs to produce goods and/or provide services. 2. What are the purposes of business activity?
Businesses exist to satisfy the needs and wants of people, organisations and governments.
Needs – are the basic necessities that a person MUST have in order to survive.
Wants – are the desires that people have. Wants are said to be infinite since people always want more than they need. 3. Distinguish between ‘customers’ and ‘consumers’ of a business.
Customers are the people or organisations that buy a product whereas consumers are the ones that actually use the product 4. What are the four factors of production and their respective rewards for being used in the production process?
The reward for the use of land is known as rent. Land owners earn rental income for letting out their property.
The return for using capital is called interest. Capital that is hired out to others earns interest.
The remuneration for labour is wages or salaries in return for their physical and mental efforts into the production process.
Entrepreneurs receive profit (if there is any) for their responsibilities and risk-taking in the production process. 5. Outline three advantages and three disadvantages of specialisation.
Advantages:
* Increased productivity * Increased efficiency * Standardisation * Higher profit margins
Disadvantages:
* Boredom * Inflexibility * A lack of autonomy – a breakdown or delay in one part of the process will cause problems for the entire business * Capital costs 6. What are the four functional areas of a business?
Production / Operations
Marketing
Finance
Human Resources / Personnel 7. Describe the three business sectors of the economy.
Businesses operating in the primary sector are involved with the extraction, harvesting and conversion of land (i.e. natural resources)
A business is a decision-making organisation involved in the process of using inputs to produce goods and/or provide services. 2. What are the purposes of business activity?
Businesses exist to satisfy the needs and wants of people, organisations and governments.
Needs – are the basic necessities that a person MUST have in order to survive.
Wants – are the desires that people have. Wants are said to be infinite since people always want more than they need. 3. Distinguish between ‘customers’ and ‘consumers’ of a business.
Customers are the people or organisations that buy a product whereas consumers are the ones that actually use the product 4. What are the four factors of production and their respective rewards for being used in the production process?
The reward for the use of land is known as rent. Land owners earn rental income for letting out their property.
The return for using capital is called interest. Capital that is hired out to others earns interest.
The remuneration for labour is wages or salaries in return for their physical and mental efforts into the production process.
Entrepreneurs receive profit (if there is any) for their responsibilities and risk-taking in the production process. 5. Outline three advantages and three disadvantages of specialisation.
Advantages:
* Increased productivity * Increased efficiency * Standardisation * Higher profit margins
Disadvantages:
* Boredom * Inflexibility * A lack of autonomy – a breakdown or delay in one part of the process will cause problems for the entire business * Capital costs 6. What are the four functional areas of a business?
Production / Operations
Marketing
Finance
Human Resources / Personnel 7. Describe the three business sectors of the economy.
Businesses operating in the primary sector are involved with the extraction, harvesting and conversion of land (i.e. natural resources)