12 marks
Define ‘opportunity cost’.
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Syllabus Edition
First teaching 2025
First exams 2027
Business Activity (Cambridge (CIE) IGCSE Business): Exam Questions
Exam code: 0450, 0986 & 0264, 0774
1 hour14 questions
24 marks
Case Study
EQR owns 150 cafes. It sells a range of drinks, including coffee. Being ethical is important to EQR. The Managing Director has been analysing EQR’s statement of financial position. The business has the objective to increase its 6% market share. The Managing Director plans to grow the business by selling franchises for $85,000. She is also considering ways to increase added value.
Outline two ways EQR could increase added value.
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34 marks
Case Study
Izaak owns a small fish restaurant. He employs two chefs (cooks) and three workers who serve in the restaurant.
Izaak has been trying to increase added value to improve profits. Izaak has been looking at the financial performance of his business. An extract is shown in Table 2.1. Izaak has received a number of complaints about food and service. He knows he must improve quality but cannot decide on the best way to do this.
Extract from income statements ($000)
Last year | Current year | |
|---|---|---|
Revenue | X | 300 |
Cost of sales | 180 | 150 |
Gross profit | 120 | 150 |
Expenses | 90 | Y |
Profit | 30 | 15 |
Outline two ways Izaak could increase added value.
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42 marks
State two factors of production.
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54 marks
Case Study
Tom wants to leave his job to become an entrepreneur. He and his sister plan to start a window cleaning business. Tom has been told that new businesses are at a greater risk of failure than established businesses. Tom has to decide whether a partnership is a suitable form of business organisation for the new business. He has calculated the business will need $700 as start-up capital. Tom knows that every decision he makes will have an opportunity cost.
Outline two possible opportunity costs of starting up the window cleaning business
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62 marks
Define 'factor of production'.
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72 marks
State two ways a business can add value to its products.
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16 marks
Case Study
After identifying a gap in the soft drinks market, Jerome developed a low sugar drink. He borrowed $5 000 from family and friends to start-up a business and to provide working capital. Jerome operates as a sole trader. To promote his product, Jerome handed out free samples in the town centre. In the first year, Jerome’s business sold 10 000 units. This is 200 units more than his break-even output. Jerome is considering ways to increase added value.
Explain how each of the following can help Jerome increase added value:
Change the packaging
Use cheaper materials
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26 marks
Do you think the most important purpose of business activity is always to add value? Justify your answer.
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38 marks
Explain two ways GHI adds value to its beauty products.
Refer to the following insert (opens in a new tab) when answering the question.
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46 marks
Do you think land is always the most important factor of production for business success? Justify your answer.
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56 marks
Case Study
After identifying a gap in the fitness market, Sarah developed a personalised online fitness coaching service. She borrowed £5,000 from family and friends to start-up her business and to provide working capital. Sarah operates as a sole trader. To promote her service, Sarah offered free trial sessions to potential clients in her local area. In the first year, Sarah's business served 200 clients. This is 40 clients more than her break-even output. Sarah is considering ways to increase added value.
Explain how each of the following can help Sarah increase added value:
Improve the service quality
Reduce service delivery costs
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112 marks
Consider the advantages and disadvantages of the following two methods LMN Logistics could use to add value to its services:
Implement a real-time tracking system for all shipments
Offer specialised packaging services for fragile items
Which method should LMN Logistics choose? Justify your answer.
Refer to the following insert (opens in a new tab)when answering the question.
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212 marks
Consider the advantages and disadvantages of the following two options for ETS to add value to its products.
Improve product quality by using more expensive, highly durable materials.
Enhance brand image through an extensive marketing campaign.
Which option should ETS choose? Justify your answer.
Refer to the following insert (opens in a new tab)when answering the question.
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