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Business Activity and Economic Concepts

Chapter 1 of Business Studies IGCSE discusses economic problems, emphasizing the distinction between needs and wants, and the concept of scarcity leading to opportunity cost. It covers specialization and division of labor, highlighting their advantages and disadvantages, and explains the purpose of business activity in combining factors of production to create goods and services. Additionally, it introduces the concept of added value, which is crucial for covering costs and generating profit.

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Nelly Eureka
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8 views5 pages

Business Activity and Economic Concepts

Chapter 1 of Business Studies IGCSE discusses economic problems, emphasizing the distinction between needs and wants, and the concept of scarcity leading to opportunity cost. It covers specialization and division of labor, highlighting their advantages and disadvantages, and explains the purpose of business activity in combining factors of production to create goods and services. Additionally, it introduces the concept of added value, which is crucial for covering costs and generating profit.

Uploaded by

Nelly Eureka
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

Chapter 1 : Business Activity

Business Studies IGCSE


Ms Nelly
Economic Problems
NEED vs WANT
Factor of production :
- Land
- Labour
- Capital
- Enterprise

Unlimited wants + Limited resources = SCARCITY

Scarcity leads to OPPORTUNITY COST as choosing is necessary.


Specialisation
 Specialisation occurs when people and businesses concentrate on what they
are best of to use the limited resources in the most efficient way.
 Division of labour is when the production process is split up into different
tasks and each worker performs one of these tasks

Advantages Disadvantages
- Workers are trained in one task - Workers can become bored doing
and specialize in this (increase just one job (efficiency may fall)
efficiency and output) - If one worker is absent and no one
- Less time is wasted moving from else can do the job, production
one workbench to another might be stopped
- Quicker and cheaper to train
workers as fewer skills to be
taught
Purpose of business activity

 Businesses combine factors of production to make products (goods and


services) which satisfy people’s wants
 Business activity therefore :
- Combines scarce factors
- Produces goods and services
- Employs people
Added value

 Added value is the difference between the selling price of a product and the
cost of bought-in materials and components.
 Added value is important because it can be used to pay other costs and may
be able to make profit if these other costs come to a total that is less than
the added value.
 To increase added value, a business can :
- Increase selling price and keep the cost of materials the same.
- Reduce the cost of materials and keep the selling price the same.

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