A-AS Level (CIE) Business Studies Paper-1: Specimen Questions with Answers 13 - 14 of 50

Question 13

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Explain the importance of mode in business

Explanation

Mode is defined as the value of maximum frequency. We may classify the mode as absolute mode and relative mode. When we talk of multi-modal frequency distributions the mode is considered in the relative sense; while the location of single typical value with maximum frequency implies absolute mode. In case of extremely skewed or J-shaped or U-shaped frequency distributions the mode is at or near the end of the distribution. Under such conditions there would be no reason to consider mode as a good measure of central tendency. When the mode is at the extreme values it is called Displaced Mode.

Utility or Scope of Mode

The mode is useful and especially meaningful in the following cases:

  • When the most typical value of a distribution is desired
  • When the distribution is highly skewed, it provides the best indication of the point of maximum concentration.
  • When the most popular or ideal size is to be found out, viz. , average size of readymade garments, shoes, etc.

Question 14

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Define economies of scale.

Explanation

Economies of scale is defined as the situation where equal percentage increase in input results in greater increase in output. In general terms, economies of scale refer to the benefits that arises to a company due to increase in the size of the scale or production. Economies of scale accrues to a firm when cost per unit falls as the output increases.

Economies of Scale

There Are Two Types of Economies

  • Internal economy: Due to increase in the size of the scale cost of production decreases due to the internal economies i.e.. it shows the ability to produce more efficiently.
  • External economy: It refer to those economies which are shared by a few businesses belonging to the same industry.

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