SECTION 1 (business activity 1) Flashcards
what are needs?
a good or service essential for living
what are wants?
a good or service that is not essential to living but wanted
what is the economic problem?
that goods are not unlimited and there is a limited amount of resources
meaning of factors of production
the resources needed to make goods
what are the factors of production?
> land: to cover all the natural resources provided by nature such as fields, forests, etc.
labour: number of people required
capital: finance, machinery and equipment
enterprise: the skill and risk-taking ability of the person
what creates scarcity?
unlimited wants + limited resources = scarcity
what is an opportunity cost?
the next best choice given up by choosing another item
what is specialization?
when people concentrate on something they are best at
why is specialization common?
> specialized technology and machines are now more widely available
increasing competition means that businesses have to keep costs low
higher living standards can result from specialization
what is a division of labor?
when the production is split up into different tasks
what are the advantages of divisions of labor?
> workers are trained in one task and specialize in it/ increases efficiency and output
less time is wasted moving from one place to another
quicker and cheaper to train workers as fewer skills need to be taught
what are the disadvantages of divisions of labor?
> workers can get bored
> if one worker is absent no one else can do their job
What is added value?
It is the difference between the selling price and the cost of the bought-in products
Why is added value important?
The sales revenue is greater than the cost of the materials bought in. It means that the business can then:
> can pay other costs like labor, management, and expenses
>may be able to make profits
How can businesses increase added value?
> increase the selling price but keeps costs of materials the same.
reduce costs of materials but keep the price the same.
