CAIE IGCSE Business Studies 1.1 business activity
Use this business-activity page to define opportunity cost, explain added value and apply production resources to real business contexts.
- Syllabus
- 2027–2029
- Course
- Business 0264
Exam points
- Define opportunity cost as the next best alternative forgone in a business decision.
- Explain how packaging, quality or lower material costs can increase added value.
- Apply added-value answers to the named business rather than giving only a generic method.
Covered syllabus points
1.1. Business activity question 1
[Maximum number: 6]
Avtar owns a car repair business which operates in the private sector. It is a small business with 2 full-time employees. Avtar wants to find out the best way for a business to increase added value. Avtar's business needs finance for many reasons. Avtar wants to know how an economic recession might affect his business.
Explain two ways a business can increase added value. Which is likely to be the best way for a business to use? Justify your answer.
Award up to 2 marks for identification of relevant points. Award up to 2 marks for relevant development of points. Award up to 2 marks for a justified decision as to which is the best way for a business to increase added value.
Points might include:
Ways to increase price:
- (Improve) quality of product/service [k] so customers may be prepared to pay higher prices [an]
- (Build a) brand image/marketing/packaging [k] so customers think the product is worth more [an]
- (Improve) product features / change/create a unique design [k] making the product more desirable than similar products so willing to pay more [an]
- Convenience [k] customers may pay more for a product they can have straightaway [an]
Ways to lower (input/raw material) costs:
- Buy cheaper raw materials / find cheaper suppliers [k] reduces material/input costs [an] widening the gap between cost and price [an]
- Reduce the number of materials used [k]
Other appropriate responses should also be credited.
Justification might include:
One way is improving the quality [k] as customers may be willing to pay a higher price [an]. It could buy cheaper raw materials [k] which may reduce material costs [an]. Improving quality is better because cheaper materials could damage the reputation leading to fewer sales [eval] while improving quality could even help attract new customers [eval].
This is a general question so there are no marks for application.
To access [eval], must discuss two valid ways. The second [eval] mark must be awarded for a comparison between two valid ways.
Some points could be [k] or [an] but do not award the same point twice.
Some analysis can be used for more than one point, but only award once.
Analysis can be awarded for explaining:
- The reason why price /cost may be higher/lower
- How way increases added value
All question bank results loaded