---
title: "Criteria — AP Business Definition & Exam Guide"
description: "Criteria are the standards a business uses to compare options and pick the best one in a decision. Learn how they power the PACED model on the AP Business exam."
canonical: "https://fiveable.me/ap-business/key-terms/criteria"
type: "key-term"
subject: "AP Business with Personal Finance"
unit: "Unit 4"
---

# Criteria — AP Business Definition & Exam Guide

## Definition

In AP Business, criteria are the specific standards (key costs and benefits) a manager sets to evaluate and compare alternatives in a deliberative decision-making process like the PACED model.

## What It Is

Criteria are the yardsticks you use to judge your options. In a [business](/ap-business/key-terms/business "fv-autolink") decision, you can't just compare two choices and say one "feels better." You need clear standards, and those standards are your criteria.

Under EK 4.3.B.1, criteria are the third step of a [deliberative process](/ap-business/unit-4/strategy-and-decision-making/study-guide/FucNdtHrKqyMpMjpL0bs "fv-autolink"): you define the problem, develop alternatives, then **establish decision-making criteria**, and finally evaluate each alternative against them. Per EK 4.3.B.2, criteria include both **quantifiable** costs and benefits (things you can put a number on, like [production](/ap-business/unit-2 "fv-autolink") costs, total sales, or profits) and **intangible** ones (things you can't easily measure, like brand reputation or employee morale). Setting criteria up front is what keeps a decision objective instead of a gut call.

## Why It Matters

Criteria live in [Unit 4](/ap-business/unit-4 "fv-autolink"): Management and Strategy, specifically Topic 4.3 Strategy and Decision Making. They directly support learning objective [AP Business](/ap-business "fv-autolink") 4.3.B, which asks you to apply a deliberative process to make a business decision. Without criteria, the PACED model collapses, because there's nothing to evaluate your alternatives against. They also connect to 4.3.A: the data a business tracks to define and evaluate strategy is often the same data it turns into decision-making criteria. On the exam, criteria are the step that proves you understand decision-making is structured, not random.

## Connections

### [PACED Model (Unit 4)](/ap-business/key-terms/paced-model)

Establishing criteria is the "C" in PACED. The whole model is just defining a [problem](/ap-business/unit-1/how-do-business-ideas-originate/study-guide/EdqjpZ5bjkqJpiGXxy8n "fv-autolink"), listing alternatives, setting criteria, and scoring each alternative against those criteria to pick a winner.

### [Tradeoff (Unit 4)](/ap-business/key-terms/tradeoff)

Criteria are how you make tradeoffs visible. When one option scores high on [profit](/ap-business/key-terms/profit "fv-autolink") but low on brand reputation, your criteria force you to weigh what you gain against what you give up.

### [Evidence (Unit 4)](/ap-business/key-terms/evidence)

Quantifiable criteria run on [evidence](/ap-business/key-terms/evidence "fv-autolink"). The financial data and metrics a business gathers under EK 4.3.A.2 become the actual numbers you plug into your criteria to compare options.

### [Strategic Decision Making (Unit 4)](/ap-business/key-terms/strategic-decision-making)

Strategy is the goal you're chasing; criteria are how you decide which path gets you there. Good criteria keep your decisions aligned with the business's mission and competitive advantage.

## On the AP Exam

Criteria show up in MCQ stems built around a deliberative decision. You'll see a scenario like a retail company deciding whether to expand into a new market or into online sales, and the question asks you to identify which item is a decision-making criterion, or to recognize that "financial return and competitive positioning" or "return on investment and brand reputation" are the criteria being used. A common trap question gives you a manufacturer relocating to cut labor costs and asks which option counts as a criterion. Be ready to spot criteria as the standard used to compare alternatives, not the alternatives themselves and not the final decision. You should be able to name both a quantifiable criterion (profit, total sales, production cost) and an intangible one (reputation, morale) for any given scenario.

## criteria vs alternatives

Alternatives are the options you're choosing between (open new stores vs. invest in e-commerce). Criteria are the standards you measure those options against (ROI, brand reputation). On the exam, a question will try to get you to mislabel an alternative as a criterion. Remember: criteria are how you judge, alternatives are what you judge.

## Key Takeaways

- Criteria are the standards a business uses to evaluate and compare its alternatives in a decision.
- They're the third step of the deliberative (PACED) process, sitting between developing alternatives and evaluating them.
- Criteria come in two flavors: quantifiable (profit, sales, production costs) and intangible (brand reputation, employee morale).
- Setting clear criteria keeps a decision objective and makes tradeoffs visible.
- On MCQs, don't confuse criteria (the yardstick) with alternatives (the options being measured).

## FAQs

### What are criteria in AP Business?

Criteria are the specific standards a manager sets to judge and compare alternatives when making a decision. Per EK 4.3.B.2, they include both quantifiable costs and benefits like profit and sales, and intangible ones like reputation.

### Are criteria the same as the options I'm choosing between?

No. The options are your alternatives; criteria are the standards you use to score those alternatives. For example, "open new stores vs. invest in e-commerce" are alternatives, while "return on investment" and "brand reputation" are the criteria.

### How do criteria fit into the PACED model?

Criteria are the "C" in PACED. You define the Problem, list Alternatives, establish Criteria, then Evaluate each alternative against those criteria to make your Decision.

### Can a criterion be something you can't measure with a number?

Yes. EK 4.3.B.2 specifically includes intangible costs and benefits as criteria, such as brand reputation or employee morale, alongside quantifiable ones like total sales and profits.

### How is a criterion different from a tradeoff?

A criterion is a standard you measure options against. A tradeoff is what you give up when one option scores high on one criterion but low on another, like choosing higher profit at the cost of brand reputation.

## Related Study Guides

- [4.3 Strategy and Decision Making](/ap-business/unit-4/strategy-and-decision-making/study-guide/FucNdtHrKqyMpMjpL0bs)

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