Chapter 1-busniess Activity Flashcards
What is a need
A good essential for living
What is a want
A good or service people would like to have but is not essential for living. People’s wants are unlimited
What is the economic problem
Unlimited wants but limited resources to produce the goods that satisfy those wants. This creates scarcity
Needs eg. (5)
Water
Shelter
Food
Clothing
Healthcare
What are the 4 factors of production
Labour
Land
Capital
Enterprise
What is the economic problem caused by and what does it lead to
Lack of factors of production
Scarcity
What are factors of production
Resources needed to provide goods/services. 4, limited supply
What is land
Resources provided by nature
What is labour
The number of people available to produce goods/services
What is capital
The finance/equipment,skill and machinery needed to start a business
What is enterprise
The skill+risk taking ability of someone to bring the factors of production together to start a business(entrepreneurs)
What is scarcity
The lack of sufficient products to fulfill a populations total wants
What is opportunity cost
What is important to ensure
The giving up of an item for the next best alternative. the next best alternative given up by choosing another item.
That the new item has a lower price than the original
Eg of opportunity cost for:
Individual
Business
Government
Holiday/car
Software/printer
School/hospital
What is specialization
When people/a business concentrate on what they are best at
Why is spécialisation common? (3)
Spécialiséd machinery+tech
People réalisé higher living standards result from being specialised
Increased competition-need to keep costs low
What is another name+definition for spécialisation in the workplace
Division of labour
When the production process is divided into different stages enabling workers to specialize in specific tasks
What are advantages of spécialisation (5)
Higher output
Raised quality
Variety
Higher market-increase in global trade
Competition keeps prices low
Disadvantages of specialisation (2)
Workers become bored-efficiency fails
Production is haltered if worker is absent
What does business activity do (3)
Combines scarce factors of production
Produces goods and services
Employs people
What is added value
The difference between the selling price of the product and the cost of bought in materials and components
What happens if there is no added value
No profit will be made
Other costs can’t be paid for
Why is added value important
Can pay other costs such as labour, management expenses etc.
May be able to make a profit if these other costs come to a total that is less than the added value
2 ways a business can increase added value+disadvantages
1.raising selling price/image-might raise cost price, slow business
2.lowering cost price-lower quality materials
