THEME 1 ANSWERS CHAPTER 1 CASE STUDY: MARS AND BANCO SANTANDER 1. Suggest two raw materials that might be used by Mars. Answers may include: cocoa, sugar, milk, dried fruit, nuts and wrapping materials. 2. Suggest two examples of different workers that might be employed by Mars. Answers may include: factory workers, machine operators, production line workers, supervisors, managers or quality inspectors. 3. Suggest two services that might be provided by Banco Santander. Answers may include: the provision of current accounts, insurance policies, loans and overdrafts, credit cards or savings accounts. 4. Discuss in groups the possible reasons why Mars may use more machinery in its operations than Santander. The provision of services such as banking often requires more people in production. This is because the service industry often involves carrying out tasks for customers that are likely to be done by people. In contrast, Mars is a manufacturer and many of its products are produced on production lines in highly automated factories. Most of the processes used to make chocolate bars, including wrapping and packaging, can be carried out by machines. The use of labour is not significant in relation to the amount of machinery. However, with more and more people using online banking, the numbers of people employed in the provision of financial services is falling. An increasing number of financial services can be provided online with a small amount of contact between bank employees and customers. ACTIVITY 1 CASE STUDY: JINDAL STEEL AND POWER 1. What is meant by the term manufacturing? One important aspect of production is manufacturing. This involves the use of resources such as raw materials, components, fuel, labour and machinery to make physical goods. In this example, steel products (such as railway lines, steel plate, steel rolls, coils and wire rods) are made from raw materials such as iron ore, coal and complex machinery. 2. Jindal Steel makes a large quantity of intermediate goods. What does this mean? Some manufacturing involves the production of intermediate goods. These goods are made to be used by other manufacturers and enterprises. They are often components and parts for much larger products. In this case, Jindal Steel and Power makes railway track for rail companies. © Pearson Education Ltd 2020. Copying permitted for purchasing institution only. This material is not copyright free. 3. What might be one advantage of using a greater quantity of machinery in production than labour? The use of machinery in production is often more efficient than using labour. It may be possible to reduce production costs if machinery is used. In this case, during the manufacturing process, the rails go through a thorough automated inspection process to maintain quality. Special equipment, which uses ultrasound technology and lasers, helps to inspect the steel’s inner quality, the rail surface quality and the track dimensions. The main advantages of this approach is that efficiency is improved in production. Consistency and quality are also guaranteed, which helps to reduce waste and keep costs down. ACTIVITY 2 CASE STUDY: CELIA SANCHEZ 1. Suggest two examples of capital that Celia will use. Capital is often said to be an artificial resource because it is made by labour. Examples of capital used by Celia mentioned in the case study include the property that was purchased where the bakery was built. Celia will also have used ovens, cooking implements such as cake tins and baking trays, a food mixer, a mobile phone, some kitchen furniture and a computer. 2. Celia Sanchez is an entrepreneur. What evidence is there in this case study to support this view? Entrepreneurs are responsible for setting up and running businesses. Celia has set up a bakery to supply local shops, cafés and hotels with cakes. This was her idea and she owns the business. These are features of being an entrepreneur. Celia has also taken some risk: she has invested MXN700 000 of her own money. If the business is not successful she may lose some, or all, of this money. Celia also organises other production factors. She has purchased some capital and she hired people to help her out once the business was established. MULTIPLE CHOICE QUESTIONS 1. B 2. C 3. A 4. A CHAPTER REVIEW CASE STUDY: TRAVELIBRO 1. What is meant by the term production? Production involves the transformation of resources such as raw materials, tools, equipment and people into goods or services. In this example, TraveLibro is providing a travel service using IT equipment and a range of different workers, for example. 2. Calculate the total income for India (in Rs) from all types of production in 2016/17. The amount of income generated by the service sector in India is Rs7 378 705. This was 53.66 per cent of the total income for the country. Therefore total income is given by: Total income = Rs7 378 705 = Rs13 750 847 53.66% © Pearson Education Ltd 2020. Copying permitted for purchasing institution only. This material is not copyright free. 3. What is meant by delivering a service? A growing amount of production in many countries is associated with the delivery of services. Delivering services involves carrying out tasks for customers or providing facilities which customers can use. In this case, TraveLibro is a travel social networking portal designed to connect users with fellow travellers, bloggers, travel agents and other industry partners. TraveLibro supplies an app which can provide customised holiday plans for a range of different holiday experiences, such as family vacations and backpacking with friends. It also provides simple and efficient planning tools linked to information sources and an option to make bookings. It also allows users to capture, save, share and relive their travel experiences. 4. Explain one factor of production used by TraveLibro. TraveLibro is a service-provider. It operates from an office in Mumbai. According to information in the case study, the owners hired some talented people from the technology, travel, research and digital sectors. These people are a factor of production (the labour). These people will use their skills to help TraveLibro provide its electronic travel services. For example, some of them would be responsible for providing special technical knowledge in the provision of information online. 5. Discuss the roles played by entrepreneurs such as Monish Shah and Malhar Gala. Both Monish Shah and Malhar Gala are entrepreneurs. Typical of entrepreneurs, they are both risk takers; they both invested their own money into the venture. Although the venture was launched by Monish, he was joined later by Malhar who contributed a substantial amount of money to the operation. This helped to match the huge amount that Monish had already invested. However, the two were able to reduce the financial risk by continuing to work full-time for their current employers. This means that if TraveLibro collapsed, they would still have the income from their jobs. Another role played by Monish and Malhar was that of organising other factors of production. For example, in 2014 they rented their first office in Mumbai. They also hired some talented people from the technology, travel, research and digital sectors. The two entrepreneurs would have spent time finding the right location for their office and recruiting key skilled- workers. In the first two years the pair worked very hard to develop the business, often only sleeping for 3 hours a night. This reflects the effort and hard work that is expected from entrepreneurs when setting up a new enterprise. As TraveLibro grows, Monish and Malhar will need to use a wide range of skills such as decision-making, people management, time management and financial judgement, to organise resources effectively in the future. CHAPTER 2 CASE STUDY: PRODUCTION ACTIVITIES 1. Which of these production activities are concerned with (a) agriculture (b) manufacturing or (c) services? a) The tea plantation in (b) is an example of a business involved in agriculture. It is using the land to grow produce. b) The assembly of televisions in (c) is a manufacturing activity. Physical products are being made. c) Both the airline company in (a) and the architects working in (d) supply services. The airliner is transporting people by plane and the architects are designing buildings for clients. © Pearson Education Ltd 2020. Copying permitted for purchasing institution only. This material is not copyright free. 2. Which of these production activities are most likely to employ large numbers of people in a developing nation? Explain your answer. Developing nations tend to employ more people in agriculture. Their economies are still in the early stages of development and generally their focus is on the production of food. Therefore, the commercial activity in (b) is most likely to employ the most people in agriculture. The photograph shows tea being harvested by people rather than machines. ACTIVITY 1 CASE STUDY: COCONUT MILK PRODUCTION 1. What is the difference between the primary and the secondary sectors? Use examples from this case study. In the primary sector, business activity involves extracting raw materials from the earth. In this case, the growing of coconuts by small-scale producers is an example of farming. Farming is probably the most important primary sector activity for most countries. Most agriculture is concerned with food production like coconut growing in this example. The secondary sector is to do with manufacturing and processing. In this case, coconuts are being processed into coconut milk. Machinery, like that shown in the photograph, is likely to be used to extract all of the milk from the coconuts. This might be followed by a cleaning process to ensure that the coconut milk is pure enough. 2. What has happened to the number of people employed in agriculture in Indonesia since 1976? In Indonesia, like many countries, the number of people employed in agriculture is falling.