The purpose and nature of businesses study guide

An organisation that produces goods or supplies services to customers in exchange for money.

A tangible product that can be stored, transported and consumed.

The monetary value of the next best alternative that is forgone when a decision is made.

Land is the natural resources used in production, such as raw materials, land for buildings, and water.

The part of the economy that extracts natural resources, such as farming, fishing, mining and forestry.

A sector is a broad category that groups businesses based on the type of activity they perform, such as primary (extracting raw materials), secondary (manufacturing), or tertiary (services).

An entrepreneur is a person who creates, manages, and takes responsibility for a new business venture, accepting the associated risks.

Innovation is the creation or improvement of products, services, processes or business models that add value for customers or stakeholders.

An entrepreneur is an individual who creates, develops, and runs a new business venture, taking on financial risk in the hope of profit.

A business environment that is constantly changing due to factors such as technology, consumer behaviour, competition, and regulation.

Expectations that businesses should operate in ways that minimise negative environmental impact and promote sustainability.

Exam practice

• Which of the following is NOT a reason why a business might start?
• Explain why an independent retailer might choose to start a business.
• Which of the following best describes a service?
• Explain the difference between a good and a service, giving an example of each from a small business context.
• Which of the following best describes opportunity cost?
• Explain how a small retailer might calculate the opportunity cost of stocking a new product line.
• Which of the following is considered a factor of production that involves the entrepreneur’s initiative and risk-taking?
• Explain the role of capital in a small manufacturing business.
• Which sector of the economy is primarily concerned with extracting natural resources?
• Explain the main difference between the primary and secondary sectors.
• Which of the following businesses best illustrates the manufacturing sector?
• Give an example of a business that operates in the services sector and explain why it fits that sector.
• Which of the following best describes an entrepreneur?
• Explain the difference between an enterprise and an entrepreneur.
• Which of the following traits is most closely linked to an entrepreneur’s ability to launch a new product line in a small manufacturing business?
• Explain how an entrepreneur’s willingness to take risks can influence the success of an online service business.
• Which of the following is NOT typically an objective for an entrepreneur?
• Explain how identifying a market gap can help an entrepreneur achieve higher earnings.
• Which of the following best explains why the business environment changes over time?
• Analyse how the introduction of a new technology can influence the operations of a small manufacturer.
• Which of the following best describes how the introduction of automated assembly lines can affect a small manufacturer’s cost structure?
• Explain how new data protection legislation can influence the operations of an online service business.