Questions and Answers
What is scarcity?
Scarcity occurs as there are limited resources and unlimited wants.
What is the purpose of business activity?
To add value to raw materials and semi-finished goods to satisfy needs and wants.
Which of the following is NOT a characteristic of an entrepreneur?
What are the factors of production?
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What is the formula for added value?
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What is an entrepreneur responsible for?
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What is the return for labor?
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What are some challenges faced by entrepreneurs?
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Study Notes
Scarcity
- Occurs due to limited resources and unlimited wants, forcing choices.
- Opportunity cost represents the next best alternative forgone when a choice is made.
Purpose of Business Activity
- Businesses add value to raw materials and semi-finished goods to meet needs and wants.
- This practice contributes to raising living standards and creates employment opportunities.
Factors of Production
- Land: Natural resources used in production; return is rent.
- Labour: Manual and skilled work; return is salary or wages.
- Capital: Finance and man-made goods (e.g., machinery); return is interest.
- Enterprise: The driving force that organizes the other factors; risks new ventures; return is profit.
Added Value
- Defined as added value = selling price - cost price, distinct from profit.
- Strategies to increase added value include:
- Raising selling price via higher quality goods, improved advertising, enhanced packaging, or product upgrades.
- Lowering cost price through efficient production methods, reducing waste, sourcing cheaper supplies, and optimizing worker training and technology.
Characteristics of an Entrepreneur
- Traits include innovation, commitment, self-motivation, multiskilled abilities, strong leadership and communication skills, self-confidence, and resilience.
Challenges Faced by Entrepreneurs
- Identifying Business Opportunities: Finding profitable markets with sufficient demand.
- Sources of Inspiration: Ideas may stem from personal skills, prior employment, or low-cost market research.
- Sourcing Finance: Financial challenges arise from inadequate personal funds, unawareness of available grants/subsidies, and insufficient trading history for loan acquisition.
- Choosing a Location: Must consider costs, target market potential, and area status.
- Building a Customer Base: A critical component for business sustainability and growth.
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Description
Explore the concept of scarcity within the CAIE AS Level Business (9609) syllabus. This quiz covers the implications of limited resources against unlimited wants, essential for understanding enterprise activities. Test your knowledge on this fundamental economic principle.
