AQA GCSE Business: The purpose and nature of businesses and Business ownership (8132) – Practice Questions

These are original questions written for Marlbridge, for revision and practice on this content. They are not reproduced past-paper questions, and they do not replicate the exam’s exact structure, question count or mark tariffs – examination boards hold copyright in their own papers. Use these alongside the official past papers from your board or school.

These questions cover sections 3.1.1 (The purpose and nature of businesses) and 3.1.2 (Business ownership) of the AQA GCSE Business (8132) specification, for first teaching from September 2017. Revise first with the study guide or the revision notes. See also the AQA GCSE Business hub, the checklist, the earlier topic practice set and the free diagnostics. All businesses and figures are invented.

Questions

1. State the main reason for starting a business shown in each example. (a) A firm buys apples from growers and sells them to cafés. [1] (b) A retired teacher runs a free reading club for children. [1] (c) A joiner builds and sells bookcases. [1] (d) A new resident sees that the village has no taxi service and starts one. [1]

2. Distinguish between a need and a want. Give one example of each. [3]

3. Identify the sector (primary, secondary or tertiary) for each: (a) a slate quarry [1]; (b) a cabinet maker [1]; (c) a dental practice [1].

4. Alvanley Fabrications makes metal gates. State which factor of production each item is: (a) the welding robot [1]; (b) the welders [1]; (c) the owner’s decision to set up the firm [1]; (d) the yard where the gates are made [1].

5. (Calculation) On Saturday, the owner of Lynmouth Surf School can teach 6 lessons earning £45 profit each, hire out boards for three hours earning £70 an hour, or work an 8-hour shift at a café for £11 an hour. She chooses to teach. Calculate the opportunity cost. [3]

6. Explain two characteristics of an entrepreneur. [4]

7. Wintergreen Garden Centre has sold plants and peat-based compost from its shop for years. Online orders are growing, and customers increasingly ask for peat-free compost. Analyse two ways the changing business environment could affect Wintergreen. [6]

8. Alvanley Fabrications closes owing £85,000. Selling its assets raises £31,000. (a) Calculate the shortfall. [2] (b) Explain how the owner’s position differs if Alvanley is a sole trader, compared with a private limited company in which the owner invested £12,000. [4]

9. Kelsingra Physio Clinic is a partnership. The partners agreed to share profit 5:3. This year’s profit is £56,000. (a) Calculate each partner’s share. [3] (b) Explain one drawback of a partnership compared with being a sole trader. [3]

10. Usherwood Hospice is a not-for-profit organisation. This year it received £240,000 in donations, grants and shop sales and spent £232,000. (a) Calculate the surplus. [1] (b) Explain how the use of this surplus is likely to differ from the use of profit in a private limited company. [3]

11. Hari owns Brockhurst Farm Shop as a sole trader. He wants to open two more shops, which he estimates will cost £150,000. He has £40,000 of savings and lives in a house he owns. He wants to keep control of the business. Evaluate whether Hari should convert to a private limited company. [9]

Answers

1. (a) Distributing products [1]. (b) Providing a service to benefit others [1]. (c) Producing goods [1]. (d) Fulfilling a business opportunity [1]. [4] Examiner insight: Answers tend to gain credit when they use the specification’s reasons and link each one to the clue in the stem, such as “no taxi service” pointing to a gap.

2. A need is something people must have to live, such as food or shelter [1]. A want is something people would like but could live without, such as a new phone [1]. One correct example of each, for example food as a need and a phone as a want [1]. [3] Examiner insight: A definition and an example are separate points, so an example with no distinction usually earns little. Beware of examples that could be either, such as “a coat” with no detail.

3. (a) Primary [1]. (b) Secondary [1]. (c) Tertiary [1]. [3] Examiner insight: Sector questions reward the activity the business carries out (extracting, making, serving), not the product name. A quarry sells stone but its main activity is extraction.

4. (a) Capital [1]. (b) Labour [1]. (c) Enterprise [1]. (d) Land [1]. [4] Examiner insight: A common slip is to call the robot “land” because it sits in a yard, or to call the owner’s savings capital. Learn that capital means man-made resources used in production.

5. The three alternatives are valued: teaching 6 × £45 = £270, board hire 3 × £70 = £210 and café 8 × £11 = £88 [1]. Teaching, the highest, is chosen [1]. The opportunity cost is the next best alternative given up, which is board hire at £210 [1]. [3] Examiner insight: Giving £88 or £298 (210 + 88) shows the definition is not secure. The usual route to full credit is to value every option, then name the single next best.

6. Any two, each with a characteristic and an explanation [2 × 2]. Example: willing to take a risk [1], because the entrepreneur may lose their savings if customers do not buy [1]. Innovative [1], because new ideas help the business stand out from rivals [1]. Hard working, organised or other creditworthy characteristics are acceptable. [4] Examiner insight: Naming a characteristic alone usually earns the first mark only. The second mark needs a reason that explains why the trait helps the business.

7. Technology: growing online orders [1], so Wintergreen may need a website and delivery arrangements [1], which changes its operations and adds costs, although it may reach more customers [1]. Environmental expectations: customers want peat-free compost [1], so Wintergreen may need to change its product range and suppliers [1], and if it does not, it may lose sales to rivals that do [1]. [6] Examiner insight: Strong analysis follows a chain from the change to an effect on the business and then to a consequence. Answers that only repeat the stem (“customers want peat-free”) tend to stay at the first step.

8. (a) £85,000 − £31,000 [1] = £54,000 [1]. (b) A sole trader has unlimited liability [1], so the £54,000 shortfall could be recovered from the owner’s personal assets such as savings or home [1]. In a private limited company the owner has limited liability [1], so the owner loses the £12,000 invested but is not personally responsible for the rest of the debt [1]. [6] Examiner insight: Linking liability to personal assets and to the figures in the stem is usually what separates a developed answer from “limited liability is safer”. Use the numbers given.

9. (a) 5/8 × £56,000 [1] = £35,000 [1]; 3/8 × £56,000 = £21,000 [1]. (b) Profit must be shared [1], so each partner receives less than a sole trader would keep [1], and with a clinic earning £56,000 the owner of a sole-trader clinic would keep all of it [1]. Other acceptable drawbacks include disagreements over decisions or unlimited liability, each developed in context. [6] Examiner insight: A drawback “compared with a sole trader” requires a comparison. Saying only “partners may argue” does not compare unless it contrasts with the sole trader making decisions alone.

10. (a) £240,000 − £232,000 = £8,000 [1]. (b) A not-for-profit organisation normally reinvests the surplus in its cause [1], for example improving care [1], while a private limited company can pay profit to its shareholders as dividends in proportion to shares held [1]. [4] Examiner insight: Answers tend to do better when they contrast who benefits from the money (the cause versus the owners) rather than saying only that one organisation “does not make a profit”.

11. Benefit: limited liability [1] means Hari’s house would not be at risk if the larger business failed, which matters with £150,000 of investment [1]. Benefit: selling shares can raise the £110,000 gap beyond his £40,000 savings [1], without relying only on loans [1]. Drawback: Hari may have to sell shares to others to raise the money [1], which would dilute his control, something he wants to keep [1]. Other drawbacks are extra paperwork and less privacy about accounts. Alternative: staying a sole trader would keep full control but leave his home exposed and capital limited [1]. Judgement: converting is probably sensible, since the scale of the investment makes the protection and extra capital outweigh the loss of some control [1], especially if he sells only a minority of shares so he keeps the majority [1]. If investors insisted on more than half the shares, the answer might change. [9] Examiner insight: Evaluation answers generally gain more when they weigh both sides using the numbers in the case, then reach a clear judgement with a reason and a condition. A list of ltd features without a decision rarely reaches the top.

Where marks are usually lost

• Giving the whole of the choice as the opportunity cost instead of the single next best alternative.
• Confusing sector with product, such as calling a quarry secondary.
• Writing a characteristic of an entrepreneur with no explanation.
• Describing a change in the environment without saying how the business is affected.
• Saying limited liability means the business cannot fail or that the owner has no debts.
• Forgetting to use figures from the case study when comparing structures.
• Treating “public limited company” as meaning state-owned.
• Finishing an evaluation with no judgement, or a judgement with no reason.

Next steps

• Revision notes for this unit
• Study guide for this unit
• AQA GCSE Business hub
• Printable checklist
• All free 10-minute diagnostics
• Book a free trial class

Frequently asked questions

Which sections of AQA GCSE Business (8132) do these practice questions cover? Section 3.1.1 The purpose and nature of businesses and section 3.1.2 Business ownership. The questions are original, not AQA past paper questions.

What is the most common mistake with opportunity cost? Giving the value of all the options given up, or the money spent, instead of the single next best alternative. Opportunity cost is only the value of the second-best choice.

How do you decide which sector a business is in? Classify it by the activity it carries out, not by the product it sells. Extracting or growing resources is primary, manufacturing and building is secondary, and providing services is tertiary.

Is a public limited company owned by the government? No. A plc is in the private sector; “public” means its shares can be sold to the general public.

Official syllabus

AQA GCSE Business (8132) specification, for first teaching from September 2017, published by AQA. Sections 3.1.1 and 3.1.2.