Business Activity, Factors of Production, and Specialisation

Comprehensive vocabulary flashcards covering the basic economic problem, the four factors of production, specialisation, division of labour, and added value.

Factors of production

Those resources needed to produce goods or services, which are limited in supply and grouped into land, labour, capital, and enterprise.

Scarcity

The lack of sufficient products to fulfil the total wants of the population.

The economic problem

The condition of scarcity that occurs because there are unlimited wants but limited resources (factors of production) to satisfy them.

Land

All of the natural resources provided by nature, including fields and forests, oil, gas, metals, and other mineral resources.

Labour

The number of people available to make products.

Capital

The finance, machinery, and equipment needed for the manufacture of goods.

Enterprise

The skill and risk-taking ability of the person who brings the other resources or factors of production together to produce a good or service.

Entrepreneurs

People who set up and operate businesses by combining land, labour, and capital, taking on the skills and risks of production.

Opportunity cost

The next best alternative given up by choosing another item.

Specialisation

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

Division of labour

A form of specialisation where the production process is split up into different tasks and each worker performs one of these tasks.

Businesses

Entities that combine factors of production to make products (goods and services) which satisfy people's wants.

Goods

Physical items such as cars and shoes that can be touched and seen.

Services

Non-physical products that satisfy people's wants, such as insurance, tourism, or banking.

Added value

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