The Nature of Business (AQA GCSE Business)

Revision Note

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Lisa Eades

Written by: Lisa Eades

Reviewed by: Steve Vorster

Goods & Services

  • Goods are tangible products that are physically transferred from businesses to consumers

Diagram: Examples of Durable and Non-Durable Goods

Examples of durable goods include fridges and furniture. Non-durable goods include chocolate bars and laundry detergent

Goods can be classified as durable or non-durable

  • Durable goods are those that can be used time and again

    • Examples include refrigerators, furniture and mobile phones

  • Non-durable goods are consumed soon after they are purchased

    • Examples include chocolate bars, washing detergent and takeaway coffee

  • Services are intangible products that are provided and consumed at a particular time or place to consumers or businesses

    • Consumer services include train journeys, on-demand video streaming and hairdressing

    • Commercial services include business accounting, office cleaning and courier services

Needs & Wants

  • Businesses thrive when they are able to meet customer needs and wants

    • Needs are considered to be essential

      • E.g. shelter, warmth or food

      • Essential needs cover a range of goods and services that individuals expect to be able to afford themselves or access through the public sector

        • Examples include health and education services, water, energy and internet access, childcare and elderly care services

    • Wants are desires which are non-essential, even if consumers consider them to be essential

      • E.g. branded trainers, an overseas holiday, a wide-screen television

      • Whilst consumers do not need these products to survive, they improve their quality of life

Education and Healthcare: Examples of Needs and Wants


Product Type


Needs


Wants

Healthcare

  • Emergency care

  • Maternity services

  • Dentistry

  • Cosmetic surgery

  • Laser eye procedures

  • Dental hygiene services

Education

  • Primary level schooling

  • Secondary level schooling

  • One-to-one tuition

  • Tertiary education

    • E.g. university

Opportunity Cost

  • Opportunity cost is the loss of the next best alternative when making a decision

  • Customers have to make choices about how to best allocate their limited financial resources amongst their competing needs and wants

  • In making these choices, they face an opportunity cost

    • If a consumer chooses to purchase a new phone, they may be unable to purchase new jeans

      • The jeans represent the loss of the next best alternative (the opportunity cost)

  • Businesses also frequently face the same problem

    • If a business decides to focus on producing electric vehicles, it may be unable to produce petrol vehicles

      • The petrol vehicles represent the loss of the next best alternative (the opportunity cost)

  • A trade-off occurs when two things cannot be fully achieved

    • Having more of one thing may mean having less of another

Examples of Potential Trade-offs


Focus


Explanation of the Trade-off

Product

  • Choosing to spend money upgrading an existing product may result in the loss of the next best alternative - research and development on a new product

Customer sales

  • A firm selling organic avocados are offered a supply contract by a supermarket that wants to buy all of their stock each month, but at a low price

  • The supermarket is a prestigious customer

  • The firm decides not to accept the contract as the opportunity cost (loss of prestigious customer) is worth less than the lost revenue to existing customers

 Market research

  • Foregoing market research may help the business get its product to market quicker, however, the trade off is that the product may not have the features/qualities desired by the market

Promotional methods

  • Businesses have a limited amount of money to spend on promoting their products. Choosing to sponsor an elite athlete means that the business may have to give up other forms of promotion, such as radio advertising

Examiner Tips and Tricks

Make sure that you can distinguish between goods and services, needs and wants, and the concept of opportunity cost. They are common topics for multiple choice questions.

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Lisa Eades

Author: Lisa Eades

Expertise: Business Content Creator

Lisa has taught A Level, GCSE, BTEC and IBDP Business for over 20 years and is a senior Examiner for Edexcel. Lisa has been a successful Head of Department in Kent and has offered private Business tuition to students across the UK. Lisa loves to create imaginative and accessible resources which engage learners and build their passion for the subject.

Steve Vorster

Author: Steve Vorster

Expertise: Economics & Business Subject Lead

Steve has taught A Level, GCSE, IGCSE Business and Economics - as well as IBDP Economics and Business Management. He is an IBDP Examiner and IGCSE textbook author. His students regularly achieve 90-100% in their final exams. Steve has been the Assistant Head of Sixth Form for a school in Devon, and Head of Economics at the world's largest International school in Singapore. He loves to create resources which speed up student learning and are easily accessible by all.