Chapter 1: The Purpose of Business Activity Flashcards
Needs
The essential goods or services necessary for living
Wants
The non-essential goods and services that people would like to have
Examples of Needs
• Water
• Food
• Shelter
• Clothes
Examples of Wants
• Brand Clothes
• Luxurious Mansion
• Pizza
• Coca-Cola
Factors of Production
• Land
• Labour
• Capital
• Enterprise
Land
All the natural resources provided by nature
Labour
All the people’s efforts to make products
Capital
All the finance, machinery, and equipment in manufacturing products
Enterprise [Entrepreneur]
All the people who have skills and have risk-taking ability
Payment for Land
Rent
Payment for Labour
Wages/Salaries
Payment for Capital
Interest
Payment for Enterprise
Profit
Unlimited Wants + Limited Resources =
Scarcity
Opportunity Cost
Forgoing the opportunity of the second best alternative for the sake of the priority need
Advantages of Specialization
• Specialised task training
• Increase Effeciency
• Increace Output
• Save Time
Disadvantages of Specialization
• Bored Workers
• Possible drops in efficiency
• Production stopped due to absence
Why are business activities needed?
• Unlimited Wants
• 4 Factors of Production
• Scarcity
• Choice
• Specialization
Aim of Business Activities
To combine the 4 factors of production to satisfy the people’s needs by producing goods and providing services
Value Added
The difference between the Selling Price and the Price of Material
How could a business increase added value?
• Advertisement
• After Sale Benefits (Warranty)
• USP (Unique Selling Point)
• Extra Benefits (Free Shipping)
• Branding
Classification of Products: Goods
• Physical Items
• Tangible
• Touch and See
Classification of Products: Services
• Intangible
Types of Products
• Costumer Goods: Bought by people (Final Customer)
• Costumer Services: Services for people
• Producer Goods: Goods produced for other businesses
• Producer Services: Services that help other businesses
