Chapter 1 - Business Activity

==Needs==

• esseential goods or services necessary for living
• satisfy the basic things for life

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%%Wants%%

• Non-essential goods and services that people would like to have
• Interests, tastes & hobbies
• Wants are unlimited

==Factors of production = C.E.L.L==

==C==apital - All finance, machinery & equipemnent required for manufacturing goods

==E==nterprise - All the people that have skills & those who have risk-taking abilities

==L==and - All of the natural resources provided by nature

==L==abour - All workers’ efforts to make products

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The real economic problem

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• The shortage of goods and services - we are not able to have everything
• Too few factors of production
• limited supplies

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Unlimited wants + limited resources = scarcity

Limited resources = making choices is necessary, this leads to ^^opportunity cost^^

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^^What is opportunity cost ?^^

Opportunity cost is the sacrifice made of the second best option when making a choice or a decision.

==Specialization==

• Occurs when people and businesses concentrate on what they are best at
• Specialization - Divisions of labor in the production process - different tasks split up to workers

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Specialization is very common because:

1. Specialized machinery & technology are now widely available
2. Increasing competition - therefore businesses need to keep costs low
3. Higher living standards can result from being specialized

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%%Advantages of specialization%%

• specialized task training - increasing productivity (out put per worker)
• increases efficiency
• increases output
• save time - from moving people from different stages of production

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==Disadvantages of specialization==

• Bored workers from doing the same job
• possible drops in efficiency
• production stopped due to absence

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Aim of a Business

Businesses combine scarce factors of production and employ people to make products (goods or services) which satisfy people’s wants

• Monopoly = the exclusive possession or control of the supply & services

• Added Value = selling prices - cost of components (or materials)

  If value is not added then other costs can’t be paid for & no profit will be made

• Mixed economy = consists of both private sector and public sector

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