REViSiON GUiDE
BUSiNESS STUDiES
GCSE O LEVEL
MUHAMMAD TALHA
03133106254 1
Sir Talha Siddiqui
03133106254
, Chapter 1: The purpose of Business Activity
The economics problem: needs and wants.
Basically, all humans have needs and wants. Needs are things we can't live without, while wants are simply our
desires that we can live without. We all have unlimited wants, which is true, since all of us want a new PC, a
car, new graphics card, etc. that we actually do not need to live. Businesses produce goods and services to
satisfy needs and wants.
Although we have unlimited wants, there are not enough resources for everyone. Resources can be split into 4
factors of production, which are:
- Land: All natural resources used to make a product or service.
- Labour: The effort of workers required to make a product or service.
- Capital: Finance, machinery and equipment required to make a product or service.
- Enterprise: Skill and risk-taking ability of the entrepreneur.
Entrepreneurs are people who combine these factors of production to make a product.
With these discussed, lets move on to the economic problem. The economic problem results from limited
resources and unlimited wants. This situation causes scarcity, when there are not enough goods to satisfy the
wants for everybody. Because of this, we will have to choose which wants we will satisfy (that will be of more
benefit to us) and which we will not when buying things. For any choice, you will have to would have obtained if
you didn't spend that money. For example, you would have got a book if you didn't buy the pen, or you would
have a burger if you didn't buy the chips. Basically, item that you didn't buy is the opportunity cost. Make sure
that the opportunity cost isn't higher than what you bought!
"Opportunity cost: the next best alternative given up by choosing another item."
Here is a diagram showing the whole economic problem:
2
Sir Talha Siddiqui
03133106254
,Division of labour/Specialisation
Because there are limited resources, we need to use them the most efficient way possible. Therefore, we now
use production methods that are as fast as possible and as efficient (costs less, earns more) as possible. The
main production method that we are using nowadays is known as specialization, or division of labour.
"Division of Labour/Specialisation is when the production process is split up into different tasks and each
specialized worker/ machine performs one of these tasks."
Advantages:
Specialized workers are good at one task and increases efficiency and output.
Less time is wasted switching jobs by the individual.
Machinery also helps all jobs and can be operated 24/7.
Disadvantages
Boredom from doing the same job lowers efficiency.
No flexibility because workers can only do one job and cannot do others well if needed.
If one worker is absent and no-one can replace him, the production process stops.
Why is business activity needed? (summary)
- Provides goods and services from limited resources to satisfy unlimited wants.
- Scarcity results from limited resources and unlimited wants.
- Choice is necessary for scarce resources. This leads to opportunity costs.
- Specialisation is required to make the most out of resources.
3
Business activity:
1. Combine factors of production to create goods and services.
2. Goods and services satisfy peoples wants.
Sir Talha Siddiqui
03133106254
, 3. Employs people and pays them wages so they can consume other products.
Business Objectives:
All businesses have aims or objectives to achieve. Their aims can vary depending on their type of business or
these can change depending on situations. The most common objectives are:
1. Profit: Profit is what keeps a company going and is the main aim of most businesses. Normally a
business will try to obtain a satisfactory level of profits so they do not have to work long hours or pay too
much tax.
2. Increase added value: Value added is the difference between the price and material costs of a product.
E.g. If the price when selling a pen is $3 and it costs $1 in material, the value added would be $2.
However, this does not take into account overheads and taxes. Added value could be increased by
working on products so that they become more expensive finished products. One easy example of this is
a mobile phone with a camera would sell for much more than one without it. Of course, you will need to
pay for the extra camera but as long as prices rise more than costs, you get more profit.
3. Growth: Growth can only be achieved when customers are satisfied with a business. When businesses
grow they create more jobs and make them more secure when a business is larger. The status and
salary of managers are increased. Growth also means that a business is able to spread risks by moving
to other markets, or it is gaining a larger market share. Bigger businesses also gain cost advantages,
called economies of scale.
4. Survival: If a business do not survive, its owners lose everything. Therefore, businesses need to focus
on this objective the most when they are: starting up, competing with other businesses, or in an economic
recession.
5. Service to the community: This is the primary goal for most government owned businesses. They plan
to produce essential products to everybody who need them.
These business objectives can conflict because different people in a business want different things at different
times.
Stakeholders:
Stakeholders are a person or a group which has interest in a business for various reasons and will be directly
affected by its decisions. Stakeholders also have different objectives and these also conflict over time. 4
There are two 6 types of stakeholders, and these types can be classified into two groups with similar interests.
Sir Talha Siddiqui
03133106254
BUSiNESS STUDiES
GCSE O LEVEL
MUHAMMAD TALHA
03133106254 1
Sir Talha Siddiqui
03133106254
, Chapter 1: The purpose of Business Activity
The economics problem: needs and wants.
Basically, all humans have needs and wants. Needs are things we can't live without, while wants are simply our
desires that we can live without. We all have unlimited wants, which is true, since all of us want a new PC, a
car, new graphics card, etc. that we actually do not need to live. Businesses produce goods and services to
satisfy needs and wants.
Although we have unlimited wants, there are not enough resources for everyone. Resources can be split into 4
factors of production, which are:
- Land: All natural resources used to make a product or service.
- Labour: The effort of workers required to make a product or service.
- Capital: Finance, machinery and equipment required to make a product or service.
- Enterprise: Skill and risk-taking ability of the entrepreneur.
Entrepreneurs are people who combine these factors of production to make a product.
With these discussed, lets move on to the economic problem. The economic problem results from limited
resources and unlimited wants. This situation causes scarcity, when there are not enough goods to satisfy the
wants for everybody. Because of this, we will have to choose which wants we will satisfy (that will be of more
benefit to us) and which we will not when buying things. For any choice, you will have to would have obtained if
you didn't spend that money. For example, you would have got a book if you didn't buy the pen, or you would
have a burger if you didn't buy the chips. Basically, item that you didn't buy is the opportunity cost. Make sure
that the opportunity cost isn't higher than what you bought!
"Opportunity cost: the next best alternative given up by choosing another item."
Here is a diagram showing the whole economic problem:
2
Sir Talha Siddiqui
03133106254
,Division of labour/Specialisation
Because there are limited resources, we need to use them the most efficient way possible. Therefore, we now
use production methods that are as fast as possible and as efficient (costs less, earns more) as possible. The
main production method that we are using nowadays is known as specialization, or division of labour.
"Division of Labour/Specialisation is when the production process is split up into different tasks and each
specialized worker/ machine performs one of these tasks."
Advantages:
Specialized workers are good at one task and increases efficiency and output.
Less time is wasted switching jobs by the individual.
Machinery also helps all jobs and can be operated 24/7.
Disadvantages
Boredom from doing the same job lowers efficiency.
No flexibility because workers can only do one job and cannot do others well if needed.
If one worker is absent and no-one can replace him, the production process stops.
Why is business activity needed? (summary)
- Provides goods and services from limited resources to satisfy unlimited wants.
- Scarcity results from limited resources and unlimited wants.
- Choice is necessary for scarce resources. This leads to opportunity costs.
- Specialisation is required to make the most out of resources.
3
Business activity:
1. Combine factors of production to create goods and services.
2. Goods and services satisfy peoples wants.
Sir Talha Siddiqui
03133106254
, 3. Employs people and pays them wages so they can consume other products.
Business Objectives:
All businesses have aims or objectives to achieve. Their aims can vary depending on their type of business or
these can change depending on situations. The most common objectives are:
1. Profit: Profit is what keeps a company going and is the main aim of most businesses. Normally a
business will try to obtain a satisfactory level of profits so they do not have to work long hours or pay too
much tax.
2. Increase added value: Value added is the difference between the price and material costs of a product.
E.g. If the price when selling a pen is $3 and it costs $1 in material, the value added would be $2.
However, this does not take into account overheads and taxes. Added value could be increased by
working on products so that they become more expensive finished products. One easy example of this is
a mobile phone with a camera would sell for much more than one without it. Of course, you will need to
pay for the extra camera but as long as prices rise more than costs, you get more profit.
3. Growth: Growth can only be achieved when customers are satisfied with a business. When businesses
grow they create more jobs and make them more secure when a business is larger. The status and
salary of managers are increased. Growth also means that a business is able to spread risks by moving
to other markets, or it is gaining a larger market share. Bigger businesses also gain cost advantages,
called economies of scale.
4. Survival: If a business do not survive, its owners lose everything. Therefore, businesses need to focus
on this objective the most when they are: starting up, competing with other businesses, or in an economic
recession.
5. Service to the community: This is the primary goal for most government owned businesses. They plan
to produce essential products to everybody who need them.
These business objectives can conflict because different people in a business want different things at different
times.
Stakeholders:
Stakeholders are a person or a group which has interest in a business for various reasons and will be directly
affected by its decisions. Stakeholders also have different objectives and these also conflict over time. 4
There are two 6 types of stakeholders, and these types can be classified into two groups with similar interests.
Sir Talha Siddiqui
03133106254
