Business Studies Chapter 1 (Business Activity) Made By : Riyan Mehta
(SELF NOTES)
Need- Is a good or service that is essential for living. Shelter,food,clothes
Want- is a good or service that is not essential for living but people
would like to have it.
The economic problem – Unlimited wants exceeding limited resources.
The real cause of the shortage or scarcity of goods and services is that
there are not enough factors of production
Factors of Production – Land , Labour ,Capital and Enterprise.
Land =This term is used to cover all of the natural resources provided by
nature and includes fields and forests, oil, gas, metals and other mineral
resources.
Labour- People available to make products.
Capital – this is the finance, machinery and equipment needed for the
Making of the goods.
Enterprise – This is the risk taking and key decision making ability.
Scarcity -Is the lack of sufficient goods and services to fulfil the total
wants of the population/people.
Unlimited wants + Limited resources = Scarcity
Opportunity cost = The next best alternative, given up by choosing
another item. We do not have resources to satisfy all our wants so the
next best alternative that we give up becomes our opportunity cost.
Specialisation – occurs when people and businesses concentrate on
what they are best at.
. Specialisation is now very common because: » specialised
machinery and technologies are now widely available » increasing
competition means that businesses higher living standards can
result from being specialised.
Division of Labour- is when the production process is split up into
different tasks, and each worker Performs one of these tasks. This is a
form of specialisation.
Advantages of division of labour Disadvantages of division of
labour
Workers are trained in one task Workers can become bored doing
and specialise in it-This increases just one job – efficiency might fall.
the efficiency and output.
Quicker and cheaper to train If a worker is absent and no one
workers as they need to be taught else can do the work then the
less tasks. production process will stop .
Businesses- Businesses combine factors of production to make products
(goods and services) which satisfy people’s wants.
What do businesses do
combines scarce factors of production to produce goods and
services.
produces goods and services which are needed to satisfy the
needs and wants of the population.
employs people as workers and pays them wages to allow them to
consume products made by other people.
Added Value-Added value is the difference between the selling price of a
product and the cost of bought-in materials and components.
Why is Added Value important?
Can pay costs such as labour costs and wages .
How can a business increase added value?
Increase selling price but keep the cost of materials the
same.
Reduce the cost of materials but keep the price the same.
