1

Introduction to business activity

Further activities

Guidance note

This unit covers a number of important concepts.

The focus of the activities is reinforcement to ensure
students have understood the key points.

Activity 1: Opportunity cost

1 Eugenie and Kelvin have saved up $1000 to buy a car. It will be quicker and cheaper to get
to work. Just before they were going to order it, a heavy storm damaged the roof of their
house. It will cost $800 to repair.
2 Silver Plc has just announced record profits. The management is keen to reward its
employees, to thank them for their efforts. It can now afford to pay its shareholders a
dividend for the first time in three years. It cannot afford to do both.
3 The government of country C has set aside $10 million for boosting the economy. It can
build either a new training college or a business park to attract new businesses to set up in
country C. Each project will cost $10 million.
For each of the above situations, answer the following questions.
a Explain one reason why a choice has to be made
b What would you decide to do? Give a reason for your choice.
c Can you think of any disadvantages of the choices you have made?

Activity 2: Unit 1 reinforcement

Business activity
1 Match each term to the correct definition.
Needs Items we would like to have, but which are not essential.
Wants Items that we must have in order to live.
2 Are the following statements true or false?
a The purpose of business activity is to make a profit for businesses.
b Opportunity cost is the cost of something in terms of giving up the next best thing.
3 Select the correct words to complete the gaps in the following sentences.
The economic problem is trying to meet wants but only having
resources to produce all the and services to meet these wants. This leads to
.

scarcity unlimited limited goods

Unit 1 Further activities © Cambridge University Press 2011 1

Factors of production
4 Match each factor of production to the correct description and example.
Factor Description Example
Land People who take risks to bring about activity. New machinery
Labour Buildings and materials. Fish from the sea
Capital Space and resources obtained from the land. Machine operator
Enterprise People who make things. Investors
5 Buying a new building increases a business’s:
a land
b capital.
Which of these is correct?
Added value
6 Draw a diagram to explain what added value is. Use the following information to help you. A
food company buys materials for $2000. It sells its products for $3500. It spends $1000 on
wages and other costs.
Sectors
7 Read the following explanation of how most economies are organised. Select the correct
words to complete the gaps.
Most economies are made up of two main sectors. The sector includes
businesses that are owned and run by individuals. The sector is made up of
organisations owned and run by the state. There is also a third sector, known as the non-
profit-making or sector, which includes organisations such as .

public charities private voluntary

Unit 1 Further activities © Cambridge University Press 2011 2