Section 1: Understanding Business Activity

Section 1: Understanding Business Activity

1. Needs

   • Wants
     • People would like it, not essential for living
   • Essential to living, people need it
     • Purpose of business activity
       • Consumer goods
         • Products sold to the final customer, can be seen and touched
       • Consumer services
         • Products sold to the public but cannot be seen or touched
       • Capital goods
         • Products sold to other businesses to help them in their production process, physical goods
           • Adding value
             • Branding
             • Excellent service quality
             • Product features
             • Convenience

2. Business activity

   • Producing goods to satisfy customer demands
     • Division of labour
       • Production divided into separate tasks, each worker does one

3. Factors of production

   • Enterprise
     • Entrepreneurs
   • Land
     • Natural resources
   • Labour
     • No. of people available
   • Capital
     • Finance needed for production of goods and services
   • Economic problem
     • Scarcity
       • Opportunity cost
         • Potential benefit from use of same resource
       • Not enough goods or services for population

4. Specialisation

   • Concentration on what people are best at in business