Business Studies Notes
Year 9 & 10
Chapter 1
The purpose of Business Activity
A NEED is a good or service essential for living (food, water, shelter, education etc.).
A WANT on the other hand is something we would like to have but is not essential
for living (computer games, designer clothing, cars etc.). people’s wants are
unlimited. The Economic Problem results from an unlimited amount of wants and a
limited amount of resources to produce those goods and wants.
Click here for further reading on this subject....
There are several things that cause the Economic Problem. These factors are known as
Factors of Productions (resources of production) and a lack of them causes scarcity.
These factors are as follows:
Land: This term refers to all the natural resources provided by nature and
includes fields, forests, oil, gas, coal, metals and other mineral resources.
Labour: This is the efforts of the people required to produce the final
product. Examples: the police, lawyers, doctors, teachers etc.
Capital: This is the finance, machinery, and equipment required to produce
the goods. The 'price' of acquiring capital is referred to as interest.
Examples: computers, cranes, cement mixers, coffee makers, specialist
machinery for factories etc.
Enterprise: This is the skill and risk taking ability of the person who
brings the other resources or factors of production together to produce the
goods or provide a service. The return for enterprise is called profit. For
example the owners of a business. These people are referred to as
entrepreneurs.
As there are never enough of the above factors to produce all the needs and wants of
people we continually face the economic problem of scarcity.
When there is a lack of resources it is impossible to satisfy all our wants, therefore,
we must decide which wants we wish to satisfy and which we intend to sacrifice.
Those that we sacrifice automatically become known as the OPPORUNITY COST.
The OPPORTUNITY COST is the next best alternative to the good that we are
buying.
Factors of Production are always in limited supply therefore it is important to use
these resources in the most efficient way.
1
, Refer to page 4 in textbook for example
Over time production methods change. Machinery is now more widely used to
produce goods than before, and large firms are more common than they used to be.
These firms employ specialised workers for special tasks.
Specialisation and Division
The reason these large firms are so successful is because they employ the production
methods of SPECIALISATION and DIVISION. A firm using this method employs
a large labour workforce and then distributes the work equally amongst them. This
can lead to a rise in production levels. However, this method has advantages as well
as disadvantages.
Advantages Disadvantages
Workers are trained in one task and
Workers may become bored doing
specialise in it – this leads to increased one job – efficiency may fall.
efficiency and output.
Less time is wasted moving from one
If one worker is absent and no one
workbench to another. else can do his job then production
may stop.
Summary
People have unlimited wants.
The four factors of production are in limited supply.
Scarcity is a result of limited resources and unlimited wants.
Choice is necessary when resources are limited and this leads to opportunity
cost.
Specialisation and Division lead to improved efficiency and high production
output.
Links
Click here to revise at BBC Bitesize.
2
Year 9 & 10
Chapter 1
The purpose of Business Activity
A NEED is a good or service essential for living (food, water, shelter, education etc.).
A WANT on the other hand is something we would like to have but is not essential
for living (computer games, designer clothing, cars etc.). people’s wants are
unlimited. The Economic Problem results from an unlimited amount of wants and a
limited amount of resources to produce those goods and wants.
Click here for further reading on this subject....
There are several things that cause the Economic Problem. These factors are known as
Factors of Productions (resources of production) and a lack of them causes scarcity.
These factors are as follows:
Land: This term refers to all the natural resources provided by nature and
includes fields, forests, oil, gas, coal, metals and other mineral resources.
Labour: This is the efforts of the people required to produce the final
product. Examples: the police, lawyers, doctors, teachers etc.
Capital: This is the finance, machinery, and equipment required to produce
the goods. The 'price' of acquiring capital is referred to as interest.
Examples: computers, cranes, cement mixers, coffee makers, specialist
machinery for factories etc.
Enterprise: This is the skill and risk taking ability of the person who
brings the other resources or factors of production together to produce the
goods or provide a service. The return for enterprise is called profit. For
example the owners of a business. These people are referred to as
entrepreneurs.
As there are never enough of the above factors to produce all the needs and wants of
people we continually face the economic problem of scarcity.
When there is a lack of resources it is impossible to satisfy all our wants, therefore,
we must decide which wants we wish to satisfy and which we intend to sacrifice.
Those that we sacrifice automatically become known as the OPPORUNITY COST.
The OPPORTUNITY COST is the next best alternative to the good that we are
buying.
Factors of Production are always in limited supply therefore it is important to use
these resources in the most efficient way.
1
, Refer to page 4 in textbook for example
Over time production methods change. Machinery is now more widely used to
produce goods than before, and large firms are more common than they used to be.
These firms employ specialised workers for special tasks.
Specialisation and Division
The reason these large firms are so successful is because they employ the production
methods of SPECIALISATION and DIVISION. A firm using this method employs
a large labour workforce and then distributes the work equally amongst them. This
can lead to a rise in production levels. However, this method has advantages as well
as disadvantages.
Advantages Disadvantages
Workers are trained in one task and
Workers may become bored doing
specialise in it – this leads to increased one job – efficiency may fall.
efficiency and output.
Less time is wasted moving from one
If one worker is absent and no one
workbench to another. else can do his job then production
may stop.
Summary
People have unlimited wants.
The four factors of production are in limited supply.
Scarcity is a result of limited resources and unlimited wants.
Choice is necessary when resources are limited and this leads to opportunity
cost.
Specialisation and Division lead to improved efficiency and high production
output.
Links
Click here to revise at BBC Bitesize.
2
