Lesson 4

1.1 – Business Activity – Scarcity

and Opportunity Cost
 Match up the key word and
definitions:
A need is.. There exist unlimited wants but limited
resources to produce the goods and
services to satisfy those wants. This
creates scarcity.
A want is.. A good or service which people would like
to have, but which is not essential for
Starter - living. These are unlimited.

Key The economic A good or service that is essential for

Definitions problem is.. living.

Scarcity is.. Are those resources needed to produce

goods or services. There are four factors
of production and they are in limited
supply.
Factors of The lack of sufficient products to fulfil
production the total wants of the population.
 Why are there so
many wants and needs
that we can’t satisfy?
The
Economic
Why are millions of
Problem people living in poverty
in many countries
around the world?
Case Study
 • The real cause of the
The shortage or scarcity of
Economic goods and services is that
there are not enough
Problem – factors of production to
The Real make all of the goods and
services that the population
Cause needs and wants.
• There are 4 factors of
Factors of production:
production – • Land
those resources • Labour
needed to • Capital
produce good or • Enterprise
services
 Land – all the natural resources
(fields, forests, oil, gas, metals,
Factors of minerals etc)
Production Reward - rent

Labour – Number of people available

to make products Reward - wages
Can you think
what the
rewards would Capital – The finance, machinery and
be for each of equipment used for the manufacture
these? of goods

e.g. the rewards Enterprise – The skill and risk-taking

for capital would ability of the person who brings the
other resources or factors of
be profit
production together to produce goods
or service (entrepreneurs)
Reward - profit
Think back to your business
idea for Cayman…

List the Your

business List the
resources
idea output
required
 • What does this mean?

• In any country, and in the

world as a whole, these
factors of production are
limited in supply.
• There is never enough land,
Scarcity capital, labour or enterprise
to produce all of the needs
and unlimited wants of a
whole population.
• There is an economic
problem of scarcity.
• What do we need to do if we
don’t have enough?
 Opportunity Cost

• We have to make choices about the resources which will satisfy our wants
• All choices involve giving things up
• The next best alternative that we give up becomes our opportunity cost.
Opportunity Cost

•The problem of ‘what to

give up’ exists for
consumer (like us),
governments and
businesses.

•We need to carefully

consider the opportunity
cost to make sure that it
is not worth more to us
than the item which we
are buying.
Opportunity Cost
 The
Economic
Problem
Specialisation
Specialisation
• What do you think this term means?

• Specialisation is when people and

businesses concentrate on what they
are best at

• Can you think of any examples of

specialisation?
 • In all societies, the
factors of production are
in limited supply.
The • It is important that we
Importance use resources in the most
of efficient ways possible.
Specialisation • Very few products are now
made by the efforts and
skills of just one worker.
• Nearly all workers
specialise in particular
skills
Changes
in
carpentry
over the
past 250
years

Page 5
Specialisation and the
division of labour
• Jack Sharma is using
the principles of
specialisation and
division of labour.
• He is dividing up the
making of tables into
different jobs and
making each worker a
specialist at just one
task.
 Advantages and Disadvantages
of Division of Labour
Division of labour has advantages and disadvantages
TASK:
• Name some advantages and disadvantages
• Sort the following into a table

Workers are trained in If one worker is absent

Less time is wasted
one task and specialise and no one else can do
moving from one
in this – this increases the job, production
workbench to another
efficiency and output might be stopped

Workers can become

Quicker and cheaper to
bored doing just one
train workers as fewer
job – efficiency might
skills need to be taught
fall
 • Pick any complete
product (e.g. bread)
• Explain how division of
labour or specialisation
Your could be used to make
this product
Turn • Explain the possible
advantages and
disadvantages of using
division of labour for
the business you choose
 Answers
Explain the possible advantages and
disadvantages of using division of labour for
the business you choose

• More efficient
• Faster production
• Workers skilled in one task
• Less time wasted moving from task to task
Lesson 4
1.1 – Business Activity - Specialisation