Business Awareness: Summary of corrections to course materials

These changes affect version V002 of the materials.

Course Notes & Questions

• Course notes page 105 – Chapter 5 Lecture example 1
We have replaced this question with the following:
Which of the following is an example of an inferior good in economics?

Organic vegetables
Designer handbags
Generic store-brand products
Premium steak cuts
Solution: Generic store-brand products (because shoppers may switch to more expensive name-brand
products as their income increases).

Task Bank & Mocks

• Task Bank page 24 – Task 2 Revision Example 1
There were some issues with the wording of this question (it should refer to partners in a partnership,
not directors). The following requirements have been re-written:
Sturgess, Johnstone and Co offer accountancy, taxation and audit services to
The partners are currently trying to understand the difference between an unlimited liability
partnership and a limited liability partnership (LLP).
(a) Assist the partners by matching the following business types with their features:

Unlimited Partnership The business is a separate legal

entity from the individual
partners.

Limited Liability Partnership Legally there is no distinction

between the business and the
individual partners.

(b) and (c) No changes

The partners have decided an unlimited partnership is the most appropriate business structure.
(d) Complete the sentence by selecting True or False:
The partners of Sturgess, Johnstone and Co must document the agreement in writing to be binding.
True/False
(e) Complete each of the below by selecting ONE option:
Goodwill in a partnership is GAP 1 The means by which a GAP 2
defined as: partnership is managed
and run is contained in:

GAP 1  GAP 2 
The amount paid for the brand The annual accounts
name
The amount that the partners have The partnership agreement
paid into the business
The amount by which the The certificate of incorporation
business’s total value exceeds the
value of its separately identifiable
net assets

Updated solution:
(a) Assist the partners by matching the following business types with their features:

Unlimited Partnership The business is a separate legal

entity from the individual
partners.

Limited Liability Partnership Legally there is no distinction

between the business and the
individual partners.

(b) and (c) No changes

(d) Complete the sentence by selecting True or False:

The partners of Sturgess, Johnstone and Co must document the agreement in writing to be binding.
False A partnership agreement can be verbal (although it is better to have it
agreed in writing).
(e) Complete each of the below by selecting ONE option:
Goodwill in a partnership is GAP 1 The means by which a GAP 2
defined as: partnership is managed
and run is contained in:

GAP 1  GAP 2 
The amount paid for the brand The annual accounts
name
The amount that the partners have The partnership agreement 
paid into the business
The amount by which the  The certificate of incorporation
business’s total value exceeds the
value of its separately identifiable
net assets

• Mock Bank page 152 – Mock 1 Task 5 (a) (i)

We have replaced this question with the following:
(a) (i) Identify which TWO of the following would be considered complementary goods in
economics? (2 marks)

(2)

Coffee and tea

Bread and butter

Pizza and burgers

Hot dogs and rolls

Solution:
Bread and butter & Hot dogs and rolls – because these are products you would usually consume
together, so changes in demand for one is likely to have an impact on demand for the other.

• Mock Bank page 182 – Mock 1 Task 7 Solution

The ticks and explanations for the first two rows need swapping over.
Row 1 – personal injury – should be avoid.
Row 2 – penalties – should be transfer.

Extra notes
Please see the extra notes at the end of this document.
 1

AAT LEVEL 3

Business Awareness (BUAW)

Extra notes on partnerships

 2

Chapter 6 – Understanding business types

Your notes cover the two most common types of partnership: unlimited liability partnerships
(sometimes called general partnerships) and limited liability partnerships (LLPs). However there is
a third type of partnership that you need to be aware of called a limited partnership.

Limited partnerships
In a limited partnership, there will be at least one general partner and at least one limited partner.
The partners have different responsibilities and levels of liability for the partnership’s debts. A
person cannot be a general and a limited partner at the same time.

General partners Limited partners

• Are liable for any debts that • Are only liable for business
the business cannot pay. debts up to the amount that
• Control and manage the they have contributed to the
business on a day to day basis. partnership. (Like shareholders
of a company).
• Cannot take part in the
management of the business.

All partners pay income tax on their share of the profits.

Limited partnerships must be registered with Companies House.

Comparison of the three types of partnership:

Unlimited liability Limited partnerships Limited liability
(or general) partnerships (LLPs)
partnerships
Separate legal No No Yes
entity from its
owners?
Formation None, except a Must register with Companies Must register with
regulations partnership House Companies House
agreement
Number of At least two At least two, comprising at At least two
members least one general partner and
at least one limited partner
Liability for Unlimited liability General partners – unlimited Liability limited to
business debts liability capital member agrees
Limited partners – liability to contribute
limited to the amount they
have contributed to the
partnership
 1

AAT LEVEL 3

Business Awareness (BUAW)

Extra notes on economics – types of goods

 2

Chapter 5 – The micro-economic environment

In economics, there are several types of goods that we can classify based on consumer behaviour
and market demand.

Normal Goods
Normal goods are goods that experience a change in demand as consumer income increases. For
example, if a person's income rises, they are likely to increase their demand for goods such as
clothing, food, and entertainment. Normal goods can be further divided into two categories:
inferior goods and superior goods.
Inferior goods are goods that experience a decrease in demand as consumer income increases. An
example of an inferior good might be generic or store-brand food products, as consumers may
choose to purchase more expensive name-brand products as their income increases.
Superior goods are goods that experience an increase in demand as consumer income increases.
Examples of superior goods include higher-quality food products or clothing items, or more reliable
or durable household appliances.
The demand for normal goods is said to be income elastic. This means that the percentage change
in the quantity demanded of a normal good is greater than the percentage change in income. For
example, if consumers' income increases by 10%, their demand for normal goods may increase by
15%. This shows that normal goods have a relatively high demand elasticity.

Luxury Goods
Luxury goods are the goods that have a higher demand elasticity than normal goods. Luxury goods
are defined as goods that are not necessary for a person's basic needs and are associated with high
income levels. Examples of luxury goods include expensive cars, jewellery, designer clothing, and
high-end electronics.
The demand for luxury goods is said to be income elastic as well, but to a greater extent than normal
goods. When consumers' income rises, they are more likely to purchase luxury goods as they can
afford them. However, the increase in demand for luxury goods is much greater than the increase
in income. For example, if consumers' income increases by 10%, their demand for luxury goods may
increase by 20%.

Necessity Goods
Necessity goods are goods that are essential for daily life, such as food, water, and housing. These
goods are typically priced lower than luxury goods and are marketed towards consumers of all
income levels. Because they are essential for daily life, demand for necessity goods is relatively
stable, regardless of changes in consumer income.

Substitute Goods
Substitute goods are goods that can be used as alternatives to each other. For example, if the price
of one brand of soft drink increases, consumers may switch to a different brand of soft drink that is
priced lower. Similarly, if the price of beef increases, consumers may choose to purchase chicken
or pork instead. The degree to which one good can be substituted for another depends on factors
such as price, availability, and consumer preferences.
 Extra notes 3

Complementary Goods
Complementary goods are goods that are typically purchased and used together. For example, if a
person purchases a video game console, they may also need to purchase video game controllers in
order to use the console. In this case, the video game console and video game controllers are
complementary goods. Similarly, if a person purchases a printer, they may also need to purchase
ink cartridges in order to use the printer. The demand for complementary goods is often
interconnected, as changes in the demand for one good can affect the demand for the other good.

Common areas of confusion

Are superior goods and luxury goods the same thing?

•No, superior goods and luxury goods are not the same thing in economics, although there
is some overlap between the two concepts.
•Superior goods are goods for which demand increases as income increases, but not as
much as for luxury goods. In other words, superior goods are goods that people are more
likely to buy as their income rises, but they are still considered necessary or essential
goods, rather than luxury items. Earlier we used the examples of higher-quality food
products or clothing items, or more reliable or durable household appliances.
•Luxury goods, on the other hand, are goods for which demand increases significantly as
income increases. Luxury goods are typically high-end, expensive products that are
considered to be non-essential or highly discretionary. Earlier we used the examples of
designer clothing, high-end sports cars, or expensive jewelry.
•So while both superior goods and luxury goods may be associated with higher income
levels, superior goods are more necessary or essential, while luxury goods are more
discretionary or indulgent.

Are luxury goods also classed as normal goods?

•Yes, a luxury good is also a normal good, but a normal good isn’t necessarily a luxury good.
•Luxury goods can be considered normal goods because their demand increases with rising
income levels.