1 Business Activity Flashcards

This set of vocabulary flashcards covers fundamental business concepts including definitions of needs and wants, scarcity, factors of production, specialisation, and added value.

Need

A good or service that is essential for living, such as water, food, shelter and clothing.

Want

A good or service that people would like to have but is not essential for living, which are unlimited and include examples like cars, video games and makeup.

Economic problem

Occurs because there are unlimited wants but limited resources to satisfy those wants, leading to scarcity.

Scarcity

When there are not enough products to fulfil the total wants of the population.

Opportunity cost

The next best alternative that is given up by choosing an item due to limited resources.

Factors of production

The resources needed to produce goods and services, consisting of four factors in limited supply: Land, Labour, Capital, and Enterprise.

Land

All-natural resources, including oil, metals, forests, gas, fields, lakes, etc., which earn the reward of Rent.

Labour

The number of people available to make the products, which earn the reward of Salary or wage.

Capital

The finance, machinery, and equipment needed for manufacturing products, which earn the reward of Interest.

Enterprise

The skill and risk-taking ability of the person to bring the other factors of production together, which earn the reward of Profit.

Rent

The reward for the factor of production known as Land.

Salary or wage

The reward for the factor of production known as Labour.

Interest

The reward for the factor of production known as Capital.

Profit

The reward for the factor of production known as Enterprise.

Specialisation

Occurs when people and businesses focus on what they are best at.

Division of labour

A form of specialisation where the production process is broken into different tasks, and each worker performs a specific task.

Added value

The increase in worth that a business gives to a product or service during the production process, calculated as: $\text{Selling price} - \text{Cost of bought-in materials}$.