Unit 1 : Business Activity Flashcards
Define Needs
goods or services that are essential for survival
Define Wants
goods or services customers that customers desire but are not essential for survival
Define Economic Problem
unlimited wants but limited resources to satisfy the wants
Scarcity
the lack of sufficient products to fulfil the total wants of the population
Name the 4 factors of production
land, labour, capital and enterprise
Define Factors of Production
resources that are needed to produce goods or services
Define Land (Factor of Production)
any natural resource used in production
Define Labour (Factor of Production)
mental and physical efforts of employees
Define Capital (Factor of Production)
finance, machinery and equipment needed for the manufacture of goods and services
Define Enterprise (Factors of Production)
individual’s who manage/coordinate the three other factors, make decisions and take risks
Define Opportunity Cost
the next best alternative given up by choosing another item
Define Specialisation
when people and businesses focus on what they are best at
Define Division of Labour
when production is split into different tasks, and each worker performs one of these tasks. (form of specialisation)
Give 3 reasons why specialisation is common
- specialised machinery and technology is widely available
- increasing competition is making businesses keep costs low
- higher living standards can come from being specialised
Give 4 Advantages of Specialisation
- workers are trained in one task and specialise in this, increasing productivity and effectivity
- specialisation with division of labour will result in better quality output
- increase in effciency will lead to economies of scale
- workers become more skilled and experienced, reducing waste of time and resources
Give 3 Disadvantages of specialisation
- repetitive tasks can cause boredom/burnout for employees, reducing motivation and job efficiency
- if a worker is absent, production is disrupted, causing waste of time and resources, and less output and efficiency
- specialised workers require higher wages and training current employees increases costs.
What is the Purpose of Business Activity
businesses combine the scarce factors of production to produce goods/services to satisfy people’s needs and wants
Define Added Value
the difference between the cost of purchasing bought-in material and the price of the finished goods
What is the formula for Added Value
selling price - total cost
What are 2 Advantages of Added Value
- helps in possibly making a profit if other costs come to a total that is less than the added value
- it can be used to pay for other expenses
What is a Disadvantage of Added Value
increasing the product’s price may lead to lower sales and even profit.
What are 2 ways of Increasing Added Value
- increasing the selling price but keeping the costs of the materials the same to create a higher quality image for the good/service to convince the customers.
- reducing the cost of the materials but keeping the price the same.
Define Intangible (Service characteristic)
a service cannot be seen, smelled, heard or touched prior to purchase
Define Perishable (Service characteristic)
a service can’t be stored like a physical good. If it’s not delivered, it is lost or does not exist.
Define Inseperable (Service characteristic)
a service is performed and consumed at the same time
Define Variable (Service characteristic)
each time a service is performed it will be performed in a different way
