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 increase his prices. ‘We can buy the same bread and cakes at lower prices,’ they tell him.. a Define ‘added value’.

[2]
b Identify the opportunity cost to Mohammed of buying a new
oven.

[2]
c Outline two benefits to Mohammed’s business of all of his
workers being able to do all of the jobs in the bakery.

[4]
d Explain two ways in which Mohammed could increase the value
added of his bakery business.

[6]

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.
[6]