Introduction Flashcards
A business
• The continuous production and distribution of goods and services carried out to earn profits under uncertain market conditions.
Features of a business
Exchange of goods and services • Dealing in numerous transactions • Profit is the main Objective • Business skills for economic success • Risks and Uncertainties • Buyer and Seller Connected with production • Marketing and Distribution of goods • Satisfying human wants • Social obligations
Goods
Items that can be seen or touched
Services
things done for you by others
Product
a good or service that can be bought or sold
Profit
the reward for the risks that businesses take in providing products
How NGOs are funded
Membership dues
private donations
sales of goods and services
grants
Importance of business
Profit Employment Incomes Choice Innovation Entrepreneurship and risk Wealth Quality of life
Concepts of needs wants scarcity opportunity cost and value addition
Need: A good or service which is essential to living.
• Want: A good or service which people would like, but is not
essential for living.
• Scarcity: There are not enough goods and services to meet
the wants of the population
• Opportunity cost: The benefit that could have been gained
from an alternative use of the same resource.
Value addition
Value addition: The performance of actions that increase the worth of goods, services or even
a business.
• Many business operators focus on value creation both in the context of creating better value
for customers purchasing its products and services, as well as for shareholders in the business
who want to see their stake appreciate in value.
• Value is created through an irreversible process which gives a resource’s ‘order’ greater
usefulness to other humans.
• A pattern of matter, energy, and/or information has economic value if the following three
conditions are jointly met:
• 1) Irreversibility: All value-creating economic transformations and transactions are
thermodynamically irreversible.
• 2) Entropy: All value-creating economic transformations and transactions reduce entropy
locally within the economic system.
• 3) Fitness: All value-creating economic transformations and transactions produce artifacts
and/or actions that are fit for human purposes.
Maslow’s Hierarchy of needs
Physiological needs: It is the bodily and unsustainable needs e.g. shelter, food,
clothing, health. There is need to satisfy these needs first so as to motivate
people.
• Safety/security needs: It is the need to be free from physical danger and fear
of losing job, property or shelter. It includes social security i.e. provision for
future e.g. gratuity/retirement benefits paid to employees.
• Social/affiliation needs: It is the need of love, feeling of belonging and human
relationships. Since people are social beings they need to belong and socialize
with other employees.
• Ego/esteem needs: It is the need for self-respect and respect from others.
• Self-actualization need: It is the desire to become what one is capable of
attaining in life. It is the need for self-fulfillment and to realize ones potential
Utility
the ability or capacity of a good/service to satisfy
a human need. It is also the usefulness or value of that
product
Form utility
Created when a business converts a given raw material from its original form into another form that yields greater or different satisfaction.
Place utility
Created when an individual trader or company transports products to a more accessible and convenient place for the customer
Possession utility
Created by increasing the desire or willingness to own a product, e.g. through advertising
