UNIT 1. Chapter 1. Enterprise

Question 1

What is the purpose of business activity?

Answer 1

• Business activity uses scarce resources to produce goods and services that allows consumers to live a higher standard of living.
• Adding value

Question 2

Def. Consumer goods

Answer 2

• The physical tangible goods sold to the general public.
• Durable goods: e.g cars or washing machines
• Non durable goods: e.g food, toothpicks

Question 3

Def. Consumer services

Answer 3

• The non- tangible products sold to the general public

- E.g hotel accommodation, insurance services

Question 4

Def. Capital goods

Answer 4

• Fixed assets

- physical goods used by industry for production e.g machinery, vehicles

Question 5

What are the factors of production? (7)

Answer 5

• Land: site for buildings and natural resources e.g coal
• Labour: manual and skilled labour to make up workforce
• Capital: Finance invested and capital goods
• Enterprise: a managing, decision making and coordinating role.
• Customers
• Suppliers
• Government: for the use of roads/rail/airports, law and order, Schools and college

Question 6

Def. Added value

Answer 6

The difference between the cost of purchasing raw materials and the price the finished goods are sold for.

Question 7

Def. entrepreneur

Answer 7

Someone who takes the financial risk of starting and managing a new venture

Question 8

What are the characteristics of successful entrepreneurs? (6)

Answer 8

• Innovation: Must be able to carve a new niche in the market to attract consumers
• Commitment and self motivation: the willingness to work hard, keep ambition to succeed, energy and focus
• Multi - skilled: know technical skills, social skills, good at handling money and keeping accounting records
• Leadership skills: have the personality that will encourage people to follow
• Self - confidence and ability to ‘bounce back’: ability to make a come back from any setbacks.
• Risk taking.

Question 9

What is a business?

Answer 9

Any organisation that uses resources to meet the needs of customers by providing a product or service that they demand.

Question 10

What are the challenges faced by entrepreneurs? (5)

Answer 10

• Identifying a successful business opportunity.
• Sourcing capital (finance)
• Determining a location
• Competition
• Building a customer base

Question 11

Why do businesses often fail? (4)

Answer 11

• Lack of record keeping
• Lack of working capital
• Poor management skills
• Changes in the business environment

Question 12

What is the impact of enterprise on a country’s economy? (6)

Answer 12

• Employment creation: reduces national unemployment level.
• Economic growth: increase in output goods => increase in GDP => increase in living standards and increased tax for the government.
• Innovation and technology change: increase in use of IT firms => helps businesses become more advanced in IT => more competition.
• Exports: increase value of national export => more internationally competitive
• Personal development: becoming an entrepreneur can lead people towards self actualisation (sense of achievement). Also creates example for others to follow.
• Increased social cohesion: giving people jobs boosts their confidence and induces socialising,

Question 13

Def. Social enterprise

Answer 13

A business with mainly social objectives that reinvests most of its profits into benefiting society rather than maximising returns to owners.

Question 14

Def. Triple bottom line

Answer 14

The three objectives of social enterprises:
+ Economic: make a profit to reinvest back into the business and provide some returns to the owners.
+ Social: provide jobs and support local communities
+ Environmental: to protect the environment

Question 15

Difference between charity and social enterprise

Answer 15

• A charity runs on donations while SE make their own income to run
• A charity works within the given structures by the government, a social enterprise creates its own opportunities and operates like any business
• A charity is designed to help immediate suffering, usually quick and short lived. A SE can be both short lived and running for decades as any business

Question 16

Def. Opportunity cost

Answer 16

The benefit of the next most desired option which is given up. (read 10/9/15 homework for further detail)