Mohammed owns a bakery. He makes bread and cakes. He employs three
workers who help him mix the dough for the bread and cakes, put the dough
into tins, bake the bread and cakes and serve customers. Mohammed has
calculated that the 'added value' of his business is low. His customers complain
when he tries to put up prices. 'We can buy the same bread and cakes at lower
prices' they tell him.
a) What is meant by 'added value'?
b) Mohammed has just bought a new oven. Explain 'opportunity cost' to
Mohammed.
c) Identify and explain two benefits to Mohammed's business of all of his
workers being able to do all of the jobs in the bakery.
d) Identify and explain two ways in which Mohammed could increase
the value added of his bakery business.
e) A friend told Mohammed 'Your business would be more successful if
you only served in the shop and let your workers make the bread and
cakes'. Do you agree? Justify your answer.