CAIE IGCSE Business 0264 - Paper 1

1.1 Business activity

Topical Past-Paper Questions

Why it’s here: The purpose of business activity, scarcity, opportunity cost, specialisation and added value.

CAIE IGCSE Business 0264 Paper 1 Topic 1.1

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Key concepts to revise

The main ideas to know for 1.1 Business activity.

Purpose of business

Businesses combine resources to produce goods and services that satisfy needs and wants.

Scarcity

Resources are limited while human wants are unlimited, so choices have to be made.

Factors of production

Land, labour, capital and enterprise are the resources used to produce output.

Needs and wants

Needs are essential for living, while wants are non-essential goods and services people would like.

Adding value

Added value is the selling price minus the cost of bought-in materials.

Opportunity cost

The next best alternative forgone when a decision is made.

About this topic

Business activity includes selected 0450 questions that continue to align with the Cambridge IGCSE Business 0264 syllabus.

Keep every answer connected to the business in the case study.

Use the case-study evidence
Develop each explanation fully
Show working for calculations
Justify the final recommendation

Before you begin

1Read the command word
2Check the marks available
3Study every table or figure
4Apply the answer to the business

Exam material

Past-paper questions

Past-paper question 0450/11/M/J/25 [6] marks

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.

d) Explain two ways a business could increase added value. [6]

Open question

Past-paper question 0450/12/M/J/24 [6] marks

e) 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. [6]

Open question

Past-paper question 0450/12/F/M/24 [2] marks

WFH produces hats and sells them to a mass market. It holds a high level of inventory. The Managing Director is concerned about the liquidity of the business and has been analysing WFH's financial statements. An extract is shown in Table 2.1. The Managing Director thinks that the business might fail.

Extract from WFH's financial statements ($000)

	2021	2022
Current assets	60	50
Inventory	20	30
Trade receivables	25	10
Cash	15	10
Current liabilities	20	40
Profit / loss	15	(10)

Table 2.1

a) Identify two possible causes of business failure. [2]

Open question