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Irish businesses face many challenges in attempting to control their costs - Leaving Cert Economics - Question 5 - 2014
Question 5
Irish businesses face many challenges in attempting to control their costs. (i) Define fixed cost and variable cost and state one example of each. (ii) State and e... show full transcript
Worked Solution & Example Answer:Irish businesses face many challenges in attempting to control their costs - Leaving Cert Economics - Question 5 - 2014
Step 1
Define fixed cost and variable cost and state one example of each.
Answer
Fixed Cost: Costs that do not change and remain constant, irrespective of the level of output. Example: Rent for business premises.
Variable Cost: Costs that fluctuate with changes in production level. Example: Raw materials used in production.
Step 2
State and explain two reasons why it is important for a business to control its costs.
Answer
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Lower Prices/ Increased Demand: By maintaining control over costs, a business can lower its prices, which may attract more customers and increase sales volume.
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Survival of Business: Managing costs helps ensure that a business can cover its expenses. If costs exceed revenues for too long, the business may face financial difficulties or failure.
Step 3
Step 4
Outline two reasons why entrepreneurs are essential for the Irish economy.
Answer
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Job Creation: Entrepreneurs create new businesses which generate employment opportunities for the workforce, thus reducing unemployment rates.
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Innovation and Growth: They drive innovation by developing new products and services, contributing to economic growth and competitiveness in the market.
Step 5
Outline two actions which the government could take to encourage entrepreneurship in Ireland.
Answer
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Enterprise Education: The government can promote enterprise education in schools and colleges to encourage more individuals to take on entrepreneurial risks.
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Financial Incentives: Offering subsidies or tax relief on business startup costs can lower the financial barriers for new entrepreneurs.
Step 6
State and explain the three factors of production, other than enterprise.
Answer
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Land: Refers to natural resources used in production, including raw materials and location where business operates.
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Labour: The human effort involved in production. This includes skilled and unskilled workers necessary for operation.
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Capital: Man-made wealth, including machinery and tools used in the production of goods or services.
Step 7
Outline two economic factors which an entrepreneur should consider when choosing a suitable location for his/her business in Ireland.
Answer
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Availability of Services: Access to necessary services such as transport, utilities, and telecommunications can facilitate business operations.
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Regulatory Environment: Understanding local regulations and planning requirements ensures compliance and helps avoid future legal and financial penalties.