Chapter 1
Business Activity
People have their unlimited wants and needs
A need is a good or service essential for living
A want is a good or a service which people would like to have but it is not essential for living.
There are unlimited wants and that creates the basic ECONOMIC PROBLEM
The economic problem is the existance of unlimited wants but limited resources to produce the
goods and services to satisfy those wants. This creates SCARCITY
SCARCITY is the lack of sufficient products to fulfil the total wants of the population.
The real cause of the shortage of goods and services is that there is not enough FACTORS OF
PRODUCTION
Factors of production are those resources needed to produce goods or services
FOUR MAIN FACTORS OF PRODUCTION
Land – All natural resources provided by the nature (oil, gas, metals, minerals)
Labour – The number of people who are available to make products
Capital – finance, machinery and equipment needed to manufacture the goods
Enterprise – The skill and risk-taking ability pf business owners
OPPORTUNITY COST
Opportunity cost happens when we decide which product we should buy.
Opportunity cost is the next best thing that could have been bought
THE IMPORTANCE OF SPECIALISATION
In all societies around the world all of factors of production are in limited supply. Therefore it is really
important to use all use such resources as efficient as possible. This leads to SPECIALISATION.
SPECIALISATION occurs when people and businesses concentrate on what they are best at.
DIVISION OF LABOUR
A form of specialisation is division of labour.
DIVISION OF LABOUR is when the production process is split up into different tasks and each worker
performs one of these tasks
ADDED VALUE
ADDED VALUE is difference between the selling price of a product and the cost of brought-in
materials.
Business Activity
People have their unlimited wants and needs
A need is a good or service essential for living
A want is a good or a service which people would like to have but it is not essential for living.
There are unlimited wants and that creates the basic ECONOMIC PROBLEM
The economic problem is the existance of unlimited wants but limited resources to produce the
goods and services to satisfy those wants. This creates SCARCITY
SCARCITY is the lack of sufficient products to fulfil the total wants of the population.
The real cause of the shortage of goods and services is that there is not enough FACTORS OF
PRODUCTION
Factors of production are those resources needed to produce goods or services
FOUR MAIN FACTORS OF PRODUCTION
Land – All natural resources provided by the nature (oil, gas, metals, minerals)
Labour – The number of people who are available to make products
Capital – finance, machinery and equipment needed to manufacture the goods
Enterprise – The skill and risk-taking ability pf business owners
OPPORTUNITY COST
Opportunity cost happens when we decide which product we should buy.
Opportunity cost is the next best thing that could have been bought
THE IMPORTANCE OF SPECIALISATION
In all societies around the world all of factors of production are in limited supply. Therefore it is really
important to use all use such resources as efficient as possible. This leads to SPECIALISATION.
SPECIALISATION occurs when people and businesses concentrate on what they are best at.
DIVISION OF LABOUR
A form of specialisation is division of labour.
DIVISION OF LABOUR is when the production process is split up into different tasks and each worker
performs one of these tasks
ADDED VALUE
ADDED VALUE is difference between the selling price of a product and the cost of brought-in
materials.
