UNIT 1: BUSINESS ACTIVITY
NEED:
A need is a good or service that is extremely necessary and important for our life
Example:
_ FOOD
_ CLOTHES
_ HOUSE
A need is a good or service that is extremely necessary and important for our life
Example:
_ FOOD
_ CLOTHES
_ HOUSE
WANT:
A want is a good or service which would you like to have (unlimited).
=> That will be up to you and your interests and tastes, but you could probably have written a very long list indeed.
Example:
_ LUXURY HOUSE
_ DESIGNER JEANS
_ CAR
A want is a good or service which would you like to have (unlimited).
=> That will be up to you and your interests and tastes, but you could probably have written a very long list indeed.
Example:
_ LUXURY HOUSE
_ DESIGNER JEANS
_ CAR
ECONOMIC PROBLEM:
The economic problem - there exist unlimited wants but limited resources to produce the good and services to satisfy.
=> The economic problem arises mainly due to two facts: human wants are unlimited, but the means to satisfy human wants are scarce.
Economics revolves around methods and possibilities of solving this fundamental economic problem.
The economic problem - there exist unlimited wants but limited resources to produce the good and services to satisfy.
=> The economic problem arises mainly due to two facts: human wants are unlimited, but the means to satisfy human wants are scarce.
Economics revolves around methods and possibilities of solving this fundamental economic problem.
ADDED VALUE:
Added value is the difference between the selling price of a product and the cost of bought in materials and components.
If value is not added to the materials and components that a business buys in then:
+ other costs cannot be paid for
+ no profit will be made
Important: because sales revenue is greater than the cost of materials bought in by the business. This means the
+ can pay other costs such as labour costs, management expenses and costs such as advertising and power.
+ many be able to make a profit if these other costs total less than the added value.
Added value is the difference between the selling price of a product and the cost of bought in materials and components.
If value is not added to the materials and components that a business buys in then:
+ other costs cannot be paid for
+ no profit will be made
Important: because sales revenue is greater than the cost of materials bought in by the business. This means the
+ can pay other costs such as labour costs, management expenses and costs such as advertising and power.
+ many be able to make a profit if these other costs total less than the added value.
BUSINESSES:
Businesses combine factors of production to make products (goods and services) which satisfy people's wants.
We have identified the following issues
+ People have unlimited wants.
+ The four factors of production - the resources needed to make goods - are in limited supply.
+ Scarcity results from limited resources and unlimited wants.
+ Choice is necessary when resources are scare. This leads to opportunity cost.
+ Specialization improves the efficient use of resources
=> These are the purpose of business activity
Business activity therefore:
+ 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
Businesses combine factors of production to make products (goods and services) which satisfy people's wants.
We have identified the following issues
+ People have unlimited wants.
+ The four factors of production - the resources needed to make goods - are in limited supply.
+ Scarcity results from limited resources and unlimited wants.
+ Choice is necessary when resources are scare. This leads to opportunity cost.
+ Specialization improves the efficient use of resources
=> These are the purpose of business activity
Business activity therefore:
+ 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
DIVISION OF LABOUR:
Division of labour is when the production process is split up into different tasks and each worker performs one of these tasks. It is a form of specialization.
ADVANTAGES:
+ Workers are trained in one task and specialize in this - this increases efficiency and output
+Less time is wasted moving from one workbench to another
DISADVANTAGES:
+ Workers can become bored doing just one job - efficiency might fall
+ If one worker is absent and no one else can do the job, production might be stopped
Division of labour is when the production process is split up into different tasks and each worker performs one of these tasks. It is a form of specialization.
ADVANTAGES:
+ Workers are trained in one task and specialize in this - this increases efficiency and output
+Less time is wasted moving from one workbench to another
DISADVANTAGES:
+ Workers can become bored doing just one job - efficiency might fall
+ If one worker is absent and no one else can do the job, production might be stopped
SPECIALISATION:
Specialization occurs when people and businesses concentrate on what they are best at.
Specialization is now very common because:
+ specialized machinery and technology are now widely available
+ increasing competition means that businesses have to keep costs low
+ most people recognize that higher living standards can result from being specialized
Specialization occurs when people and businesses concentrate on what they are best at.
Specialization is now very common because:
+ specialized machinery and technology are now widely available
+ increasing competition means that businesses have to keep costs low
+ most people recognize that higher living standards can result from being specialized
OPPORTUNITY COST:
Opportunity cost is the next best alternative given up by choosing another item.
Example: I could have got a big house but I choose small house so my opportunity cost was not being able to have a big house.
Opportunity cost is the next best alternative given up by choosing another item.
Example: I could have got a big house but I choose small house so my opportunity cost was not being able to have a big house.
SCARCITY:
Scarcity is the lack of sufficient products to fulfil the total wants of the population.
* Note:
unlimited wants + limited resources = scarcity
=> unlimited wants such as car, luxury house, designer jeans...
Scarcity is the lack of sufficient products to fulfil the total wants of the population.
* Note:
unlimited wants + limited resources = scarcity
=> unlimited wants such as car, luxury house, designer jeans...
FACTORS OF PRODUCTION:
Factors of production are those resources needed to produce goods or services.
There are four factors of production:
+ Land: natural resources such as gas, oil, metal ... for production
+ Labour: staff/worker to perform task/job
+ Capital: money/ machines finance pay
+ Enterprise: connect/take risk three above
Factors of production are those resources needed to produce goods or services.
There are four factors of production:
+ Land: natural resources such as gas, oil, metal ... for production
+ Labour: staff/worker to perform task/job
+ Capital: money/ machines finance pay
+ Enterprise: connect/take risk three above
TEST BUSINESS ACITIVITY:
SOME QUESTION OF BUSINESS ACTIVITY:
ANSWER:
1/ a/ Needs: shelter, clean water, clothing
Wants: luxury house, coca cola, car, designer jeans
b/ Needs are essential to life where as wants are things we would like but are not essential to life
2/ There are not enough resources (scarcity) to satisfy all our wants so there are choices to be made
3/ There are 4 factors of production. these are:
_ Land: resources for production
_ Labour: workers to perform task/job
_ Capital: money/machines finance pay
_ Enterprise: connect/take risk/skill full
4/ Opportunity cost is the next best option by choosing another item
(ex): I could have got a big house but i choose small house so my opportunity cost was not being able to have a big house.
5/ Example: if an army wants to buy either a plane or a gun, it buys the plane and the gun is the opportunity cost because it was the next best option which it now does have
I could have got a big house but I choose small house so my opportunity cost was not being able to have a big house.
6/ Division of labour is when the production process is split up into different tasks and each worker performs one of these tasks. It is a form of specialization.
7/ Because division of labor can make sure that multiple things can be done at once, while not having too many people on one job. The larger a team for one job gets, the harder it is to control and more variables for something to go wrong.
8/ 1. putting icing on cake
2. mixing ingredients
3. setting oven
4. getting ingredients
9/ 1. They employ people
2. They provide the goods and services that we enjoy
3. They pay the bulk of ALL taxes collected, keeping YOUR tax rate down.
10/ Added value is the difference between the selling price of a product and the cost of bought in materials and components.
11/ 1.Providing expert advice and a tremendously high level of professionalism
2.Service levels
1/ a/ Needs: shelter, clean water, clothing
Wants: luxury house, coca cola, car, designer jeans
b/ Needs are essential to life where as wants are things we would like but are not essential to life
2/ There are not enough resources (scarcity) to satisfy all our wants so there are choices to be made
3/ There are 4 factors of production. these are:
_ Land: resources for production
_ Labour: workers to perform task/job
_ Capital: money/machines finance pay
_ Enterprise: connect/take risk/skill full
4/ Opportunity cost is the next best option by choosing another item
(ex): I could have got a big house but i choose small house so my opportunity cost was not being able to have a big house.
5/ Example: if an army wants to buy either a plane or a gun, it buys the plane and the gun is the opportunity cost because it was the next best option which it now does have
I could have got a big house but I choose small house so my opportunity cost was not being able to have a big house.
6/ Division of labour is when the production process is split up into different tasks and each worker performs one of these tasks. It is a form of specialization.
7/ Because division of labor can make sure that multiple things can be done at once, while not having too many people on one job. The larger a team for one job gets, the harder it is to control and more variables for something to go wrong.
8/ 1. putting icing on cake
2. mixing ingredients
3. setting oven
4. getting ingredients
9/ 1. They employ people
2. They provide the goods and services that we enjoy
3. They pay the bulk of ALL taxes collected, keeping YOUR tax rate down.
10/ Added value is the difference between the selling price of a product and the cost of bought in materials and components.
11/ 1.Providing expert advice and a tremendously high level of professionalism
2.Service levels