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Chapter 1 - Business Activity

Needs

  • esseential goods or services necessary for living

  • satisfy the basic things for life

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

Capital - All finance, machinery & equipemnent required for manufacturing goods

Enterprise - All the people that have skills & those who have risk-taking abilities

Land - All of the natural resources provided by nature

Labour - All workers’ efforts to make products


The real economic problem

  • The shortage of goods and services - we are not able to have everything

  • Too few factors of production

  • limited supplies

Unlimited wants + limited resources = scarcity

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


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

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

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

Disadvantages of specialization

  • Bored workers from doing the same job

  • possible drops in efficiency

  • production stopped due to absence


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

AA

Chapter 1 - Business Activity

Needs

  • esseential goods or services necessary for living

  • satisfy the basic things for life

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

Capital - All finance, machinery & equipemnent required for manufacturing goods

Enterprise - All the people that have skills & those who have risk-taking abilities

Land - All of the natural resources provided by nature

Labour - All workers’ efforts to make products


The real economic problem

  • The shortage of goods and services - we are not able to have everything

  • Too few factors of production

  • limited supplies

Unlimited wants + limited resources = scarcity

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


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

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

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

Disadvantages of specialization

  • Bored workers from doing the same job

  • possible drops in efficiency

  • production stopped due to absence


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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