Business Activity

Need

A good or service essential for living.

Want

A good or service that people would like to have, but is not required for living.

Scarcity

The basic economic problem where there are unlimited wants and limited resources to produce goods and services to satisfy those wants.

Opportunity cost

The next best alternative forgone by choosing another item.

Factors of Production

Resources required to produce goods or services, including land, labor, capital, and enterprise.

Specialization

When a person or organization concentrates on a task at which they are best at.

Advantages of Specialization

Increased efficiency, faster production, quicker training, skill development.

Disadvantages of Specialization

Monotony for workers, higher labor turnover, over-dependency on specialized workers.

Business

Any organization that uses all the factors of production to create goods and services to satisfy human wants and needs.

Added Value

The difference between the cost of materials bought in and the selling price of the product.

How to increase added value

Reduce the cost of production, raise prices, branding, adding special features, providing premium services.

Land

the natural resources that can be obtained from nature. This includes minerals, forests, oil and gas. The reward for land is rent.

Labour

the physical and mental efforts put in by the workers in the production process. The reward for labour is wage/salary

Capital

the finance, machinery and equipment needed for the production of goods and services. The reward for capital is interest received on the capital

Enterprise

the risk taking ability of the person who brings the other factors of production together to produce a good or service. The reward for enterprise is profit from the business.