Professional Documents
Culture Documents
• Business Activity: the process of producing goods and services to satisfy the
needs and wants of consumers.
• Economic Problem: Unlimited wants cannot be met because there are limited
factors of production. This creates scarcity.
• Land: all the natural resources such as minerals, ores, fields, oil and forest.
• Labour: Is the number of people available to work.
• Capital: Is the machinery, equipment, and finance needed for the production
of goods and services.
• Enterprise: Is the people prepared to take the risk of setting up the business -
they are known as entrepreneurs.
• However there are not enough of these factors of production to make all the goods
and services needed or wanted by the world’s population. This is the problem of
scarcity.
• Scarcity: There are not enough goods and services to meet the wants of the
population.
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Business Studies 0450
• Scarcity, forces us to make choices. When making a choice, you need to make
sure the product or service you choose is worth more than the one you give up.
The next best choice is the opportunity cost.
• Opportunity Cost: The benefit that could have been gained from an alternative
use of the same resource.
• IMPORTANCE OF SPECIALISATION
• Specialisation: People and businesses concentrate on what they are best at.
• To make sure, that there is minimal wastage of the factors of production,
specialisations is introduced.
• Benefits of Specialisation (to business): Makes the business more efficient and
reduces costs.
Machinery also helps all jobs and can operate 24/7 If one worker is absent no one can replace him, so
production process stops.
Products have a better quality High number of employees are to be hired who are
skilled, this increases costs.
• Division of Labour: Production is divided into separate tasks and each worker
does just one of those tasks.
• Consumer Goods: Products which are sold to the final consumer. They can
be seen (physical goods) and touched (tangible goods). They are divided into
durable (goods which can be used over and over again. ex. Computers) and
Non durable (Can be used only once. ex. Food and drink. )
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Business Studies 0450
• Businesses try to add value at every stage of the production process. This is done
by taking raw materials and turning them into a good or service and selling them to
a customer at a price greater than the cost of raw materials in the production
process.
• Other costs such as worker’s wages, and energy costs must be deducted from the
added value to calculate profit.
• Product Features: Products that have more features and functions than
similar products in the markets, will allow the producer to charge a higher price.
• Convenience: Consumers are often ready to pay a higher price, for a product
they can have immediately or which can save them time, ex. ready meals,
home delivery.
• Reducing the cost of materials but keeping the price of the product same. OR
increasing selling price, but using the same raw materials with the old price.