1.1 Business activity Flashcards
What are needs and wants?
- Needs: goods or services that are essential to living
- Wants: good or services which people would like, but not essential for living
What is scarcity?
When there are not enough goods and services to meet the wants of the population
What is opportunity cost?
The benefit that could have been gained from an alternative use of the same resource
What is specialisation and why is it important? Examples?
Specialisation: the focus on specific tasks and activities. It can lead to increased production levels, and result as over-concentration on particular activities and products.
- It is important because this means that the business is efficient and it reduces costs of production.
Types of specialisation:
- Specialisation by region / country
- Specialisation by factors of production
- Specialisation by businesses
Name the advantages and disadvantages of specialisation
Ads:
- Resources can be focused on their most productive lines.
- Focusing on a set task enables an individual, company, region or country to become more productive in that task.
- Larger outputs can be produced at lower unit costs
- Concentration of specialists enables the sharing knowledge and skills between specialists
Disads:
- Over-reliance on a set task or product -> specialists become redundant
- Specialists spend all their time doing the same or similar things with little opportunity for variety
- Lack flexibility
- Delays or holdups in one area can slow down the whole process
What is added value and how can it be increased?
Added value: when a business tries to add value at every stage of the production process so that they can sell the product or service to customers at a greater price.
How to add value?
- Branding
- Adding special features
- Provide excellent service
- Conveniency
What is the purpose of business activity?
To create products and services
