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:
Specialized machinery & technology are now widely available
Increasing competition - therefore businesses need to keep costs low
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
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:
Specialized machinery & technology are now widely available
Increasing competition - therefore businesses need to keep costs low
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