1 Business activity -

Read the data response and answer the following questions

Farah opened her business, Farah’s Salon (FS) just after leaving school. She offers
hairdressing and beauty services for women. She employs three workers who have
quite different skills. One is a hair stylist, one is a beauty specialist and the other is a
receptionist. This means that Farah is able to offer a very wide range of beauty and
hairdressing services very efficiently. Shampoos, hair sprays and many other beauty
products are bought in from several suppliers. Farah’s business is now very busy.
Farah is planning to use some of FS’s capital to buy a computer to keep customer
records of treatments they have received and to allow an accurate record of
appointments to be kept. However, she is worried about the opportunity cost of this.
Farah is keen to increase the added value of her business. She has not yet decided on
how to achieve this but she thinks that buying cheaper shampoos and other beauty
products is probably the best way. Farah needs to recruit another employee. She has to
choose between one applicant who is an experienced and specialist hair stylist but
who has no other beauty experience and the other applicant who has some experience
of both hair and beauty but is not a specialist in either.

a Identify two different factors of production used by Farah. [2 marks]

b Define ‘opportunity cost’. [2 marks]
c Outline two ways in which specialisation of its employees could benefit FS. [4
marks]
d Explain two examples of how the business activities undertaken by FS benefit the
local economy. [6 marks]
e Do you think that buying in cheaper shampoos and other beauty products is the best
way to increase added value by FS? Justify your answer. [6 marks]