AS Level Business
Chapter 1 Business and its Environment
Enterprise
1.1 The Nature of business activity
§ Business aims to satisfy people’s needs – need resources
§ Businesses operate in an ever-changing environment, but
its purpose remains the same – add value while meeting
people’s needs and making a profit
§ There is a problem with unlimited needs and wants but
limited resources to satisfy them – economic problem of
scarcity
Purpose of business activity
• Business is an organization that uses resources to meet
the needs of consumers by providing a finished product or
service
• All stages of business productivity involve adding value
• Business activity uses the scarce resources to produce
goods and services that meet consumer demand
Business:
Þ Identify the needs of consumers
Þ Purchase necessary resources
Þ Produce the goods and services which satisfy the needs
of consumers while still making a profit
Þ Business activity exists to produce goods or services to
meet consumer demand/need
Þ The consumers purchase consumer goods or consumer
services
Factors of production needed
• Land- includes all the renewable and non-renewable
resources of nature
, • Labour- manual and skilled labour make up the workforce
of the business
• Capital- finance needed to set up the business, pay for the
continuing operations but also the manufactured
resources used in production – capital goods
• Enterprise- is the innovation provided by the risk-taking
individual (entrepreneur). Combine all factors of
production
Concept of adding value
• Aim to create value by producing goods and services by
selling them at higher prices than produced for
• If consumer is willing to pay the higher price, then the
business has been successful
• Difference between the selling price and the cost price is
called the added value
• Value added is not profit as other costs need to be paid for
first, if a business can add value without increasing costs,
then profit will increase
Opportunity cost
• In deciding to purchase one item we must give up another
item as they cannot all be afforded
Chapter 1 Business and its Environment
Enterprise
1.1 The Nature of business activity
§ Business aims to satisfy people’s needs – need resources
§ Businesses operate in an ever-changing environment, but
its purpose remains the same – add value while meeting
people’s needs and making a profit
§ There is a problem with unlimited needs and wants but
limited resources to satisfy them – economic problem of
scarcity
Purpose of business activity
• Business is an organization that uses resources to meet
the needs of consumers by providing a finished product or
service
• All stages of business productivity involve adding value
• Business activity uses the scarce resources to produce
goods and services that meet consumer demand
Business:
Þ Identify the needs of consumers
Þ Purchase necessary resources
Þ Produce the goods and services which satisfy the needs
of consumers while still making a profit
Þ Business activity exists to produce goods or services to
meet consumer demand/need
Þ The consumers purchase consumer goods or consumer
services
Factors of production needed
• Land- includes all the renewable and non-renewable
resources of nature
, • Labour- manual and skilled labour make up the workforce
of the business
• Capital- finance needed to set up the business, pay for the
continuing operations but also the manufactured
resources used in production – capital goods
• Enterprise- is the innovation provided by the risk-taking
individual (entrepreneur). Combine all factors of
production
Concept of adding value
• Aim to create value by producing goods and services by
selling them at higher prices than produced for
• If consumer is willing to pay the higher price, then the
business has been successful
• Difference between the selling price and the cost price is
called the added value
• Value added is not profit as other costs need to be paid for
first, if a business can add value without increasing costs,
then profit will increase
Opportunity cost
• In deciding to purchase one item we must give up another
item as they cannot all be afforded
