Scarcity means there is a finite supply of goods and raw materials. Finite resources mean they are limited and can run out. Unlimited wants mean that there is no end to the quantity of goods and services people would like to consume.
Scarcity
The situation where humans wants are unlimited and resources are limited.
Wants
These are things people wish to have but are sufficient for living
Needs
These are things people wish to have which are essential for living
Factors of production
These are resources used to produce goods/services.
Land
all natural resources provided by nature used to produce goods/services
Labour
All humans effort; physical or mental used to produce goods/services
Capital
All manmade resources used to produce goods/services
Enterprise
The skill and risk-taking ability by combining the various factors of production
Opportunity Cost
the next best alternative that is given up by choosing another item
Specialisation
when people and businesses concentrate on what they are best at
Division of labour
When the production process is split up into different tasks. It is a form of specialisation
Advantages of division of labour
Work is faster
Work is easier
Less time is wasted
Disadvantages of division of labour
Work can become boring
Production might be delayed due to a lack of workers
Workers are distracted from other disclipines
Business
Any organisation that uses all factors of production to create goods/services to satsify human
Added value
the difference between the cost of bought-in materials and the selling price of the good.
Profit
profit = total revenue (price x quantity) - total cost
the importance of added value
allows businesses to pay for costs of maintenance and to pay workers with their wages
how to increase added value
increase the selling price but keep the cost of bought-in materials
reduce the cost of bought-in materials and keep selling price the same
add special features
provide premium services
branding
classification of businesses
ownership
size
activity
Activity
primary
secondary
tertiary
primary sector
it involves the use and extraction of natural resources.
examples:
mining
fishing
oil rigging
secondary sector
involves the manufacturing of goods into finished or semi-finished goods
examples:
food processing
car painting
tertiary sector
the service sector, it consists of all services produced in an economy
eg.
teaching
banking
hotels
ownership
private
public
mixed economy
private sector
a sector where the means of production, exchange and distribution are in the hands of private owners
public sector
the sector where the means of production, exchange, and distribution are in the hands of the government
size
number of employees
value of output
value of sales
value of capital invested
industry
a group of firms producing the sa
why does government support businesses
reduce unemployment
increases competition
increases GDP
benefits society
social enterprise
an enterprise with the main aim of social welfare
entrepreneur
a person who takes risks to organise a business by combining factors of production
business enterprise
an enterprise with the primary aim of maximising profit
sole trade
an organisation set up and run by one person
advantages of sole trade
decision-making is fast
few legal obligations
flexibility of work
disadvantages of sole trade
difficulty in making business choices
unlimited liability
insufficient capital
lack of continuity is high
lack of skills or experience
partnership
a business organisation set up and run by two or more people
deed of partnership
a document that binds all partners in a partnership
advantages of partnership
easy to raise funds
specialisation
losses are shared
the scale of production is expanded
disadvantages of partnership
profits are shared
disagreements
unlimited liability
partnerships are dissolved by the death of a partner
franchise
an arrangement whereby one company gives the right to another company to produce/sell their goods
franchisee
the organisation that buys the right from a franchisor
franchiser
the person granting a franchise
advantages of franchise
revenue is usually a lot
certain services are provided by the franchiser
less risky
disadvantages of franchise
start-up costs are high
a percentage of sales is payed to franchisor
strict control by franchisor
the franchisor has the power to withdraw franchise agreement
limited company
a company that is legally independent from shareholders
shareholders
people that own part/shares of a business
stakeholders
individuals or groups that have a strong interest in a business
types of limited company
publo
public limited company
a company which sells its shares to the public but requires a minimum amount to setup
private limited company
a company that cannot sell its shares to the general public but a minimum and maximum number of shareholder has to be set
advantages of limited company
limited liability
access to large capital
professionalism and credibility
private limited companies have secrecy on accounts
disadvantages of limited liability
complex to form
expensive to operate
public limited companies required to disclose accounts
private limited companies may not be able to generate much capital
less flexibility
cooperative
a business organisation owned by its customers and its employees
types of cooperative
consumer cooperative
producer cooperative
consumer cooperative
made up by the customers of a particular group
producer cooperative
a cooperative owned by employees of a business organisation