1.1 – Business Activity Flashcards
Need:
a good or service essential for living. Examples include water and food and shelter.
The Economic Problem
Need
Want
Scarcity
Want:
a good or service that people would like to have, but is not required for living.
Examples include cars and watching movies.
Scarcity is
is a situation that exists when there are unlimited wants and limited resources to produce the goods and services to satisfy those wants.
For example, we have a limited amount of money but there are a lot of things we would like to buy, using the money.
Opportunity cost is
the next best alternative forgone by choosing another item.
SCARCITY → CHOICE → OPPORTUNITY COST
Due to scarcity, people are often forced to make choices. When choices are made it leads to an opportunity cost
Factors of Production
- Land: the natural resources that can be obtained from nature. This includes minerals, forests, oil and gas. The reward for land is rent.
- Labour: the physical and mental efforts put in by the workers in the production process. The reward for labour is wage/salary
- Capital: the finance, machinery and equipment needed for the production of goods and services. The reward for capital is interest received on the capital
- Enterprise: the risk taking ability of the person who brings the other factors of production together to produce a good or service. The reward for enterprise is profit from the business.
Specialization
occurs when a person or organisation concentrates on a task at which they are best at.
Advantages of Specialization
- Workers are trained to do a particular task and specialise in this, thus increasing efficiency
- Saves time and energy: production is faster by specialising
- Quicker to train labourers: workers only concentrate on a task, they do not have to be trained in all aspects of the production process
- Skill development: workers can develop their skills as they do the same tasks repeatedly, mastering it
