Business Activity Exam Notes

Economic Activity: This refers to the production of goods and rendering of services for which people pay.
The Economic Problem: This arises from unlimited wants but limited resources to satisfy them, resulting in scarcity.
Scarcity: The lack of sufficient products to fulfill the total wants of the population.
Opportunity Cost: The next best alternative given up when making a choice.
Factors of Production: Resources needed to produce goods or services. These are limited in supply and include:
- Land: Natural resources provided by nature (e.g., fields, forests, oil, gas, minerals).
- Labor: The effort of people needed to make products.
- Capital: Finance, machinery, and equipment needed for production.
- Enterprise: The skills and risk-taking ability of an entrepreneur who brings resources together.
Needs: Goods and services essential for survival (e.g., food, water, clothing, shelter).
Wants: Things we can live without but desire; they are unlimited.
Unlimited Wants: People never get enough and always want more than they have.
Limited Resources: There are not enough resources to produce everything people need and want, creating scarcity.

Primary: Involves the extraction of raw materials (e.g., coal, iron, wheat).
Manufacturing: Transforms raw materials into goods (e.g., wood to furniture, steel to cars, textiles to clothes).
Wholesalers: Buy in bulk from manufacturers and sell to retailers.
Retailers: Buy from wholesalers and sell goods to consumers.
Service: Provides services to consumers and businesses (e.g., hairdressers, dentists, doctors, banks).

The state plays a major role in controlling economic activity through economic policies and legislation:

Fiscal Policy: The use of taxation and government expenditure to influence economic activity.
Monetary Policy: Influencing economic activity through control of the money supply and interest rates. Money supply is the amount of money in circulation.
Income Distribution: Striving for equal income distribution through taxation and welfare payments (e.g., old age, disability, unemployment benefits).
Balance of Payments: Encouraging exports (through subsidies) to achieve a constant surplus.
Infrastructure Development: Building infrastructure.

Purpose: To identify and satisfy customer needs and wants.
Combine scarce factors of production to produce goods and services.
Provide jobs and contribute to the wealth of the country, reducing unemployment.

Providing goods and services to meet basic needs (food, health, education, housing, employment).
Investing in research and technology to adapt to changing consumer demands.
Creating employment opportunities, increasing community income.
Ploughing back into the community through sponsorships (bursaries, charities, churches).
Contributing to economic development by attracting further investment and employment opportunities.
Paying taxes, enabling the government to provide public goods and services (water, electricity, education, hospitals).
Raising the standard of living in the communities they operate in.

Inadequate provision of merit goods (education, health, housing) and public goods (bus shelters, street lighting, police) due to lack of profitability and direct payment.
Exploitation of workers (low pay for hard work).
Growing social and economic inequality (rich get richer, poor get poorer).
Private firms ignore negative externalities (pollution, resource wastage).
Uncertainty in the business environment (economic fluctuations).
Uncontrolled competition can lead to business closures and unemployment.
Market failures can lead to monopolies, which can exploit consumers with high prices.

Characteristics:
- All resources are privately owned.
- No government control over land, capital, and labor.
- Firms produce goods for profit.
- Consumers choose what to buy.
- Producers decide what to supply.
- Resource allocation is based on supply and demand.
- Businesses compete, keeping prices low.
Advantages:
- Individuals can set up any legal business.
- Consumers have a wide variety of goods and services.
- Workers are motivated to work hard.
- Competition increases efficiency and keeps prices low.
- Profit motive encourages new businesses.