Chapter 6: Business Activity

Definition:
A need is a good or service which is essential for
living.
A wants is a good or service which is not essential
for living. Peoples wants are unlimited.
The economic problem there exist unlimited
wants but limited resources to produce the goods and
services to satisfy those wants. This creates scarcity.
Factors of productions are those resources
needed to produce goods or services. There are four
factors of productions;
Land; This term is used to cover all of the
natural resources provided by nature and
includes fields, forests, oil, gas, metals, and
other mineral resources.
Labour; This is the number of people available
to make products
Capital; This is the finance, machinery and
equipment needed for the manufacture of
goods.
It is the money invested into a business by
the owners.

 Entrepreneur/Enterprise/Owner; This is
the skill and risk-taking ability of the person
who brings the other factors of productions
together to produce a good or service.
For example; the owner of the business.
Scarcity is the lack of sufficient products to full fill
the total wants of the population.
Opportunity cost is the next best alternative given
up by choosing another item. For example; Sarah has
5 hours and a choice of studying English or
economics. If she chooses to study economics then
English will be her opportunity cost.
Specialization occurs when people and business
concentrate on what theyre best at.
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.
Less time is wasted moving from one work
bench 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 his job. The production process might
stop.
Business combines factors of productions to make
products (goods and services) which satisfy peoples
wants.
Added value is the difference between the selling
price of the product and the cost of bought in
materials and components.
Selling price (cost of bought in materials)
= value added