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chapter one - business and the environment in which it operates - 24-02-09

chapter one - business and the environment in which it operates - 24-02-09

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Published by Open2009
This notes is for Business Studies at O-Level for the Cambridge University, UCLES. Comments are welcomed.
This notes is for Business Studies at O-Level for the Cambridge University, UCLES. Comments are welcomed.

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Published by: Open2009 on Feb 24, 2009
Copyright:Attribution Non-commercial


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- 1 -
Types of business activity
Levels of economic activity
We have 3 stages of the level of business activity:
: Primary productionIt involves all the earth natural resources activities in the primary involve
mining, fishing,forestry, oil extraction.
Stage 2
: Secondary stage of productionThis stage involves taking material and resources from the primary sector and converts theminto manufactured goods. It involves activities like building and construction, air craftmaking baking.
Stage 3
: Tertiary productionInvolves in providing services to consumers and other businesses also this include bankinginsurance hotels and hairdressing
Public and Private sectors of Industry
There are 3 different types of economic system which are used by the countries to managetheir resources efficiently as possible. These are
Free market economy is
1) Where all resources are owned privately.2) There is no government control over land and labour.3) Business produces goods to make a profit.4) They make more profitable goods that consumers demand.5) They make less of less profitable goods.6) Prices are determine by the demand and supply of goods.
- 2 -Advantages of a free market economy1. Consumers are free to choose what they want to buy.2. Workers are encourage to work hard as they can keep most or all their income because of low or non existence of taxes.3. Business compete with each other and this could keep prices low4. New business are encouraged to set up in order to make profitsDisadvantages of free market economy1. As private firms aim at profit maximization they will not provide goo
ds and services suchas street lighting bench health and care services to everybody. Only those who can afford theprivate firm prices will be benefiting from this others will be deprived from it2. When there is no government control the economy will face booms and recession.3. To increase prices firm can become monopolies and exploit consumersIn this whole world we do not have any economy which is 100% free market. Governmentare involved in important economic decisions, to a greater or lesser degree. The United Statesis the country with an economy most like a free market system. But even there, the UnitedStates is a free market economy but the government has a lot of control over the economy.
Command or planned economy
(a) Here all the resources are planned by the government(b) There might be no private property at all(c) The government decides what to produced and what quantities(d) Consumers have little choiceWorkers could be told where to work and what to work to perform
- 3 -Advantages of a command or planned economy1. Government control eliminate any waste resulting from competition between two firms2. There should be work for everybodyThe needs of the population are met, but there is little production of the luxury goods for thewealthyDisadvantages of a command or planned economy1. There is no incentive to work harder as the government fixes wages and private
property isnot allowed.2. The government may not produce goods which people want to buy.3. The lack of a profit motive for firms leads to low efficiency.Examples of the command economy is Russia, china however china now is moving toward afree market economy
Mixed economy
A mixed economy combines some features of both a free market economy and commandeconomy e.g. of mixed economy is Mauritius
Private sector
Private sector made of businesses not owned by the government. These businesses will maketheir own decision and earn profit. Most of the private firms will run profitably.
Public sector
Public sector made of government or state owned. The government decides how much toproduce and what price to charge consumers. Some goods and services are provided free of charge to the consumer-such as a state health and education services. This money comes fromthe taxpayers. Here profit is not the aim but welfare of the people.

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