PRACTICE QUESTIONS:

SHORT ANSWER:
1. What is the role of consumer behaviour in the business environment? How can understanding consumer
preferences and behaviour benefit businesses?
Businesses and consumers are interdependent on one another. The business sector relies on consumers to purchase
their goods and services in order for them to make profit. Understanding consumer behaviours and preferences can
help a product or service provider identify growth opportunities and develop strategies to improve customer
retention.

2. Discuss the impact of international trade on businesses.

International trade has significant advantages and disadvantages on businesses. It is beneficial as the provides a
larger scope of consumers for a business, hence providing more profit for the business. However, exchange rate
fluctuations can impact profitability, leading to financial loss.

3. What is the role of financial institutions in the business environment?

Financial institutions act as intermediaries between savers and borrowers. Where savers insert their money into
these institutions, they lend their money to borrowers, who repay this with interest.

4. Explain the concept of a marketing mix. What are the four Ps, and how do they contribute to the promotion
and selling of products or services?
The marketing mix includes multiple areas of focus as part of a comprehensive marketing plan. It often refers the the
four Ps – price, product, place (distribution) and promotion. Price is based on manufacturing and markup prices,
what a product is with on the market and on what competitors are selling that product for. Product refers to the
brand and packaging of a good. Promotion is the publishing of a product, organisation or venture to increase public
awareness. There are many forms such as advertising, publicity, public relations, sales promotion, personal selling
etc. Finally, place is how the product goes from the manufacturer to the consumer. These Four Ps work together to
create a well-rounded marketing strategy. By carefully considering each element and how they interact, businesses
can effectively promote and sell their products or services. For example, a high-quality product is more likely to
succeed when combined with a competitive price, efficient distribution channels (place), and a well-executed
promotional campaign to inform and attract customers. Marketing professionals continually analyse and adjust these
elements to respond to changing market conditions and consumer preferences, ensuring a successful product or
service launch and ongoing sales.

5. Discuss the role of social media in modern marketing and promotion.

a. How can businesses leverage social media platforms to connect with customers and drive sales?
These days, everyone has some form of social media and is easily influenced by it, so social media. can use this
platform to advertise their product and demonstrate how it is used. Business owners and possible consumers can
interact with each other and hence, drive sales.

b. Provide an example of a successful social media marketing campaign.

Spotify wrapped —> In anticipation of Spotify Wrapped being released to all Spotify users in the beginning of
December, users utilise Spotify to create a socially acceptable Spotify Wrapped. Spotify itself has two plans, one
being free, the other being Premium. The free Spotify experience restricts users from full access to specific songs.

6. Discuss the impact of e-commerce on promoting and selling products.

a. How has online shopping transformed the sales landscape for businesses?
Online shopping shopping has provided a larger platform for businesses to promote their products, causing an
increasing in demand and, hence increasing profits. On the other hand, it also increases competition, challenging
businesses to differentiate themselves from others.

b. Share an example of a successful e-commerce business.

Amazon is a large e-commerce business that has grown substantially since 1995.

7. Outline the ways businesses can obtain funding for their small business.
There are two ways businesses can obtain funding for their small business: equity and debt finance. Equity finance is
where the business owners provide the funding from either their own assets or from previous profits. Debt financing
comes from a loan, where the business owner applies for a loan from the bank and use the profits to repay the loan
with interest. However, if they cannot repay this, they are bankrupt and must repay this loan with their assets.

8. What's the aim of sale promotions?

The aim of sales promotion is to attract consumers to purchase a good or service.

9. Describe the different types of promotions.

There are various types of promotion methods, all of which bring attention and/or attract customers. Advertising is
paid, non-personal method of promotion addressed to a large variety of people, which ca be done through mediums
such as via billboards. Personal selling involves the activities of a sales representative directed to a customer in an
attempt to make a sale. Relationship marketing relates to building of relationships with individual customers to
achieve customer loyalty. Opinion leaders who influence others and business will use to their benefit, for example,
celebrity endorsement. Publicity refers to any free news story about a business. It is uncontrolled, however draws
attention to the business. Public relations are the role of public relations personnel to design, implement and
manage the public relations events of the business, activities aim at creating and maintaining favourable relations
between a business and its customers. This can be done though making speeches on special occasions or donations.
Finally, sales promotion is a direct inducement to customers in an attempt to sell more of its product. It aims to
entice new customers and encourage a trial purchase of a new product. This could include coupons, loyalty rewards
programs, premiums, refunds and sample.

10. What is GDP?

GDP or Gross Domestic Product measures the economic growth in a country. It is the total value of all goods and
services produced in a country in any given year.

11. What is the difference between indictable and summary offences? Provide examples.
Both indictable and summary offences fall under criminal law. Where summary offences are minor, less serious
crimes such as petty theft, vandalism or traffic infringements, indictable offences are major, ore serious crimes, such
as armed robbery, homicide and sexual assault.

12. What is Product differentiation? Provide factors that influence it.

Product differentiation is the process of making changes to a product to make it stand out amount others of the same
or similar item. The main factors of product differentiation are convenience, value for money, social and ethical
issues, environmental issues and customer service.

13. Circular flow of Income- what is it? Injections and leakages, what is the relationship between all the areas.
The circular flow of income shows the connections between the five sectors of economy: households, businesses,
financial institutions, governments and overseas. It also shows where only is being injected into the economy and
where the money is being leaked. These injections and leakages help economists calculate changes in the level of
economic activity within the economy. It refers to a simple economic model which describes the circulation/flow of
income between producers and consumers.

14. What are the different types of laws?

There are two main types of law – public, which includes administrative, commonwealth, criminal and industrial law
and private – tort (negligence, defamation, nuisance and trespassing), contract, family and property. There is also
criminal (defendant vs prosecutor) and civil (defendant vs plaintiff) and domestic (within a certain geographic region)
and international (voluntary among different countries).

15. Explain the barriers to the law.

There are five main barriers to the law: distance, language, cost, time and procedures. Time is a barrier as when a
trial goes on for long periods of time, it becomes unfair. Distance is a barrier, specifically for people who live in
remote areas as they have to travel log distance on multiple occasions, such as to the courthouse or police station.
Procedures are considered a barrier as a person who is ignorant to legal procedures may be unaware to rights and
responsibilities, along with the fact that it is an intimidating and confusion experience. Additionally, language barriers
make it difficult to understand legal terminology and without an interpreter, it would be difficult to understand what
is going on during the court hearing. Lastly, obtaining legal advice can be very expensive due to the high cost of fees
charged by lawyers and barristers and this cost could be increased in the presence of an appeal or a legal case being
prolonged. This may deter people from exercising their legal rights.

16. What is an economy?

Economy refers to the activities undertaken for the purpose of production, distribution and consumption of goods
and services.

17. Explain the impact of a recession on the Australian economy.

A recession or depression has significant impact on the Australian economy. It results in high unemployment rates,
low levels of consumer demand and business sales and profits reach their lowest points, more common bankruptcies
and low interest and inflation rates. This then forces businesses to maintain employee wages and salaries, decrease
production, decrease the size of the workforce, stop expansion and maintain current equipment, technology and
assets.

18. What is CSR?

CSR or Corporate Social Responsibility that businesses employ to attract more customers. It involves being socially,
ethically and environmentally (employing a green philosophy) considerate as consumers begin to be more ethically,
socially and environmentally conscious.

19. Distinguish between the types of legal structures.

There are four types of legal structures: High Court of Australia, Supreme Court, District Court and Local Court. The
high court is a federal court, located in Canberra, where there are 7 judges (the Chief Justice and Six Justices) and no
jury. It deals with appeals from the supreme courts and hears cases concerning interpreting the Constitution. The
Supreme Court is the highest court in New South Wales and its judgements are binding on the district and local
courts. It deals with indictable offences, serious civil cases involving more than $750,000, including contract and
negligence cases, building disputes, the validity of wills and matters involving trusts as well appeals from the two
lower courts. Th district court is the middle court in the state legal system. The cases are dealt with by a judge and a
jury. The jury (12 in criminal cases and 6 people in civil cases) decides whether the accused is guilty or not. It deals
with serious civil cases for claims over $100,000 up to $750,000, including debt recovery or personal injury claims,
damages for person injury arising out of motor vehicle accidents, indictable offences, except murder and treason and
appeal from the local and children’s court. Finally, the local court is where all criminal and the majority of civil cases
begin. It has no judge or jury, but a magistrate who hears the case and decides the verdict and punishments. It deals
with minor civil disputes up to $100,000, minor summary offences, decides over a committal hearing dealing with
indictable offences, hears bail applications, issues arrest and search warrants and hear applications for Apprehended
Violence Orders (AVOs).

20. How can consumer confidence affect the economy?

Consumer confidence affects the economy dramatically as it essentially drives the economy. When consumer
confidence is high, they are more willing to spend money, providing money for businesses, to expand, it leads to the
increase of interest and inflation rates high levels of employment. However, when consumer confidence is low,
people are not willing to spend money and will lead the economy into a recession as there is only a limited amount
of money circulating within the economy, causing high unemployment rates and business to close down.

Extended response: intro, 3 body and conclusion

Evaluate the significance of THREE key considerations when planning and organising a small business, include
relevant examples.

When planning and organising a small business it is vital to understand and acknowledge the key considerations.
Three considerations include market research, locations and finance.
Market research refers to the process by an entrepreneur gathers information on possible customers to better
understand and make the most correct decisions regarding their target market. Market research plays a significant
role in the planning and organisation of a small business it is required to investigate various aspects of a business,
such as, location, competition and demographics. Market research could involve talking with or surveying potential
customers and competitors. It could mean contacting trade or professional organisations for advice about the
business and the locations being considered. Market research could become as formal as obtaining data from the
ABS about the demographics of the people in the area. This has been proven to be a key consideration as business
the fail to conduct this research usually end up falling. For example, Starbucks, a well-known café in America opened
80+ stores in Sydney, however they failed to do their market research and offered the same menu and ultimately
failed as the Australian target market have different preferences than the American demographic. On the other hand,
market research is a tedious, time-consuming procedure that may only reach a small demographic. Overall,
conducting market research is an important task in planning and organising a small business, even if it is a tedious
task.
Additionally, the location refers to a place or structure occupied by a firm to run its operations. This consideration
plays an essential role in whether the business succeeds or fails. This is important because businesses need a flow of
people walking and driving past their store. It should be easily visible and will hence, affect many aspects of how a
business operates, such as total sales and how expensive it is to run. Sometime, when located correctly, businesses
can attract customers from competitors and complementary stores. For example, Urban Culture was located in a
section of Bankstown shopping centre were not many people shop, so they switched locations to be upstairs where
there is more foot traffic and will be able to attract more customers. Due to the fact that they were not visible, they
were unable to generate enough profit, however, after moving to a more populated section their overall profits
increased. Conversely, this new location has more expenses such as a higher rent and more advertising to lead
customers to their new location in order to cover this expense. Thus, although a visible location is costly, it is worth it
and maximises profit, so the considering location is significant to a great extent when planning and organising a small
business.
Lastly, adhering to legal requirements and regulations relevant to the industry and location. This includes business
licenses, tax obligations, employment laws, and industry-specific regulations. Compliance prevents legal issues, fines,
and damage to the business's reputation. It establishes trust with customers and creates a secure environment for
growth. For example, a home-based catering service defines its legal obligations, obtains necessary permits, and
complies with food safety regulations. This builds trust with customers, ensuring the business's long-term success.
However, navigating complex legal requirements can be daunting for small business owners. Staying up to date with
evolving regulations and managing legal costs are challenges. Legal compliance and adherence to regulations are
pivotal for small businesses to operate ethically, avoid legal complications, and gain the trust of stakeholders.
In conclusion, market research, location and adhering to legal requirements are imperative to to consider when
planning and organising a small business, and not considering these will have drastic implications on the success of
the business.

Multiple choice quiz

The Economic and Business Environment

1. Which of the following is a role of the government sector in the circular flow of income?

A. To collect taxes from individuals and businesses

B. To produce goods and services for consumers

C. To loan money to individuals and businesses

D. To export goods and services overseas

2. Which of the following is a key feature of a recession?

A. Unemployment rises

B. Falling rate of inflation

C. Falling levels of production

D. Decrease in consumer spending

3. What is the point at which the demand and supply curve intersect called?

A. Demand

B. Market equilibrium

C. Price mechanism
 D. Supply

4. What is a person who takes a risk at turning an idea into a successful business known as?

A. CEO

B. Entrepreneur

C. Leader

D. Manager

5. Which of the following factors would cause an increase in demand?

A. A rise in consumer incomes

B. An increase in the cost of production

C. If a substitute good becomes cheaper

D. If prices for the product are expected to fall in the future

6. Which of the following is an example of a financial intermediary?

A. A bank

B. A stock broker

C. A manufacturer

D. A government organisation

7. A business employs 150 people who all work in the one factory. What would this business be classified as?

A. Global

B. Large

C. Medium

D. Small

8. Which of the following is a negative impact of globalisation for businesses?

A. It has led to increased competition.

B. It has made it easier for businesses to expand.

C. It allows businesses to access cheaper materials.

D. It has given businesses access to a much greater pool of talent.

9. Which sector of the five-sector circular flow model of the economy involves imports and exports?

A. Business

B. Financial

C. Government

D. Overseas sector

10. Which system of trade was commonplace for Aboriginal and Torres Strait Islander people?

A. Bartering

B. Debt
 C. Exporting

D. Purchasing

Law, society and political involvement

1. John sued his neighbour for $200 000.

In which court would this case be heard?

A. Local Court

B. District Court

C. Supreme Court

D. Coroner’s Court

2. Which of the following statements is FALSE in relation to the Local Court?

A. It hears bail applications.

B. Cases are heard by a judge.

C. It hears summary offences (minor crimes).

D. It hears civil disputes for claims of up to $100 000.

3. What is the name of the two parties involved in a criminal case?

A. Plaintiff and sheriff

B. Plaintiff and defendant

C. Plaintiff and prosecution

D. Prosecution and defendant

4. Which of the following statements is FALSE in relation to juries?

A. Juries decide the sentence.

B. Anyone on the electoral roll is eligible to be selected for jury duty.

C. Juries need to determine a person’s guilt beyond reasonable doubt.

D. Juries must make a unanimous decision or a majority decision of 11 out of 12.

5. Which of the following is TRUE in relation to common law?

A. A proposal for common law is called a bill.

B. Common law refers to law made by judges.

C. Common law refers to law made by parliament.

D. Common law needs to be passed by both houses of parliament.

6. What is the lower house in Federal Parliament called?

A. Senate

B. Legislative Council

C. Legislative Assembly

D. House of Representatives
7. Which of the following are both factors that can create barriers to accessing the law?

A. Cost of obtaining legal advice and precedents

B. Precedents and lengthy trials

C. Lengthy trials and long distance from lawyers or courts

D. Long distance from lawyers or courts and ethics

8. What is the voting system used to elect members of the House of Representatives?

A. Preferential

B. Absolute majority

C. First past the post

D. Proportional representation

9. What is tort law classified as?

A. Public law

B. Private law

C. Criminal law

D. Common law

10. Rebecca sued a newspaper for writing an article that damaged her reputation. Of which area of tort law is this an
example?

A. Defamation

B. Negligence

C. Nuisance

D. Trespass

Running a business

1. Michael and Rosie own a small business. They have unlimited liability. Which type of legal structure is this?

A. Sole trader

B. Partnership

C. Public company

D. Private company

2. Which of the following is a secondary source of data that businesses can use for market research?

A. Interviews

B. Focus groups

C. Journal articles

D. Surveys

3. Which of the following is a state government regulation?

A. Competition and Consumer Act

B. Deduction of income tax

C. Payment of superannuation

D. Work health and safety regulations

4. What is an advantage of debt financing over equity financing?

A. Debt finance requires regular payments.

B. Debt finance requires payment of principal.

C. Debt finance does not involve any loss of ownership.

D. Debt finance does not have to be repaid.

5. Which of the following statements about franchising is not true?

A. Franchising is experiencing enormous growth in Australia.

B. Operating a franchise is generally a high-risk business venture.

C. The product sold by a franchisee is usually a well-known product.

D. Franchisors usually provide ongoing training and support.

6. In relation to the economic cycle, which of the following would be a feature of a peak?

A. Decreasing sales and profits

B. Low level of unemployment

C. Decreasing business investment

D. Consumer spending at lowest levels

7. Which term is used to describe how businesses consider the financial, environmental and social impacts of their
decisions?

A. Ethical decision-making

B. Environmental sustainability

C. Corporate social responsibility

D. Environmental corporate responsibility

8. Which method of promotion uses print or electronic mass media to communicate a message about the product?

A. Advertising

B. Publicity

C. Personal selling

D. Sales promotion

Promoting and selling

1. A business decided to sponsor their local soccer team. Which promotional strategy would this be an example of?

A. Publicity

B. Advertising

C. Public relations
 D. Personal selling

2. What is the term used to describe when products that are the same or similar are made to appear different
and/or better than those of their competitors?

A. Differentiation

B. Customised approach

C. Standardised approach

D. Relationship marketing

3. Which of the following would be an example of relationship marketing?

A. Mailing out pamphlets

B. Using an opinion leader

C. Giving away free samples

D. The use of loyalty programs

4. A mobile phone company often pays to have their phone appear in different movies. What is this an example of?

A. Product placement

B. Creation of needs

C. Opinion leader

D. Materialism

5. Which of the following statements is FALSE in relation to advertising?

A. Advertising is very expensive.

B. Advertising is personal in nature.

C. Advertising uses both electronic and print communication.

D. Advertising enables the business to reach a very large audience.

6. Promoting a business through social media would be an example of which promotional strategy?

A. Publicity

B. Advertising

C. Public relations

D. Sales promotion

7. A retail store uses cookies to track the internet activity of its customers and uses this information to target them
with advertisements. Which ethical issue is this an example of?

A. Creation of needs

B. Invasion of privacy

C. Product placement

D. Truth in advertising
8. Which of the following statements about the Competition and Consumer Act is FALSE?

A. It is administered by the Australian Competition and Consumer Commission.

B. It makes false and misleading advertising illegal.

C. It makes product placement illegal.

D. It is a federal law.

9. What is a group of customers to which a business intends to sell its products known as?

A. Market segmentation

B. Target market

C. Market niche

D. Mass market

10. Which of the following is NOT an advantage of social media advertising?

A. It is inexpensive.

B. It is easy to use and monitor.

C. It helps businesses gain exposure and engage with customers.

D. It gives businesses complete control about what is said about their business.