Chapter 1 – Understanding Business Activity
1. Needs and Wants:
Needs are goods or services necessary for survival.
Wants are non-essential goods or services that people desire.
2. Scarcity and Unlimited Wants:
People's wants are unlimited, but resources are limited, leading
to scarcity.
Scarcity occurs when there are not enough products to fulfill the
population's wants.
3. Resources (Factors of Production):
Land: Natural resources used in production.
Labor: Human mental and physical efforts.
Capital: Man-made goods used in production.
Enterprise: The risk-taking ability of an entrepreneur.
4. Forced Choice and Opportunity Cost:
Due to limited resources, people must make choices.
Opportunity cost is the next best alternative given up when
choosing another item.
Flashcards - Business Studies:
Front of the flashcard:
Define Needs and Wants.
What causes scarcity in the economy?
List the four resources (Factors of Production).
What does opportunity cost mean?
Back of the flashcard:
Needs are essential goods or services required for living, while Wants
are non-essential desires.
Scarcity occurs due to the mismatch between unlimited wants and
limited resources.
The four resources are Land (natural resources), Labor (human efforts),
Capital (man-made goods), and Enterprise (entrepreneurial skills).
Opportunity cost refers to the best alternative given up when choosing
another item due to limited resources.
Specialization: Focus on what individuals and businesses do best.
Division of Labor: Production split into different tasks, with each
worker performing one task.
Advantages of Specialization:
1. Increased efficiency as workers become specialized in tasks.
2. Less time wasted, leading to higher efficiency.
3. Increased output may lead to economies of scale.
4. Workers become more skilled and experienced, reducing
mistakes.
Disadvantages of Specialization:
1. Workers may become bored, reducing efficiency.
2. Absent workers can create disruptions in the production process.
3. Reliance on others may reduce overall productivity.
Flashcards - Business Studies:
Front of the flashcard:
Define Specialization and Division of Labor.
What are the advantages of specialization?
What are the disadvantages of specialization?
Back of the flashcard:
Specialization is when people and businesses focus on what they do
best.
Division of Labor is when production is split into different tasks, and
each worker performs one task.
Advantages of specialization include increased efficiency, reduced time
wastage, higher output, and improved worker skills.
Disadvantages of specialization include worker boredom, disruptions
from absent workers, and reduced productivity due to reliance on
others.
Purpose of Business Activity
Production in Businesses: Scarce factors of production combined to
create goods or services to meet people's wants.
Employment and Wages: Businesses employ workers and pay them
wages, enabling them to consume products.
Added Value
Added Value: It's the difference between selling price and the cost of
raw materials and components.
Not Profit: Added value doesn't include costs for labor, transport, etc.
Increasing Added Value: Businesses can raise selling price, create
brand image, improve packaging, add features, offer higher quality, or
reduce total material costs.
Flashcards - Business Studies:
Front of the flashcard:
Define Added Value in business.
What factors are considered in added value?
How can businesses increase added value?
Back of the flashcard:
Added Value is the difference between selling price and cost of raw
materials and components.
Added Value excludes costs for labor, transport, etc.
Businesses can increase added value by raising selling price, creating
brand image, improving packaging, adding features, offering higher
quality, or reducing total material costs.