IGCSE BUSINESS STUDIES

Unit 1 – Business ActivityChapter 1: The Purpose of Business Activity

In this unit you will learn…….

The economic problem of unlimited wants and limited resources

The factors of production The development of economic activity

and the use of specialization What is meant by a business The most common aims of business The different groups involved in

business activity.

Classify these.

Needs Wants

Needs and Wants

Needs› Essential goods or

services necessary for living.

› Satisfy the basic things for life.

Wants › Non-essential

goods and services that people would like to have.

› Interests & Tastes

Make your list

Needs Wants

Limit your wants to no more than 25 items please!

The Economic Problem

The shortage of goods & services TOO FEW FACTORS OF PRODUCTION!

Land Labour

Capital Enterprise

Factors of Production

Land

All of the natural resources provided by nature

Labour

All people’s efforts to make products

Capital

All finance, machinery & equipment in manufacturing products

Enterprise

All people that have skills & have risk-taking ability factors of production produce good or service

Economic Problem

Limited in Supply

Land Labour

Capital Enterprise

Factors of Production

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Factors of Productionrewards for the factors of production

Each of these factors of production is paid by business e.g. The payment for land is rent

Can you think what we call the payments for the other factors? Labour Capital Entrepreneurs

*

wage/salary

interest

profit

Real Economic Problem

Unlimited Wants

Limited Resources

Scarcity+ =

Limited Resources: ChoiceIndividual Business Government

Summary – Economic Problem

Limited ResourcesProduction 200 years ago

Joe cuts the wood

He assembles the table

Joe polishes the table

Joe delivers the table on a horse and cart

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Limited ResourcesModern Day Production

The wood for 20 tables is cut with a specialist machine

Carpenters assemble the tables

The tables are finished in the polishing department

A transport company collects the tables to deliver them to furniture retailers

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Making the best use of limited resources

Specialization / Division of Labour

Production Process

Different tasks split up

Workers performs a task

SpecializationDivision of Labour

Advantages Specialised task training Increases efficiency Increases output Save time

Disadvantages Bored workers Possible drops in efficiency Production stopped due to

absence

Why business activity is needed?

Unlimited wants 4 factors of production

Resources in limited supply to make goods and services

Scarcity Limited resources – unlimited wants

Choice Opportunity Cost

Specialisation Improves efficient use of resources

Business Activity

Combines s_____ f_____of p_______ in order to produce g_____ and s_______.

Produces those goods and services which are needed to s______ the n______ and w_____ of the p___________

E_______ people as worker and pays them w____ / s______ to allow them to consume p_______ made by other p________.

Aim of Businesses

Combine factors of production Produce products satisfy peoples wants

Classification of Products

Goods Physical items Tangible Touch and see

Services Intangible

Business Objectives

Aim / Target to work towards Make a Profit To increase added value To expand the business To achieve business survival To provide a service

Profit

Value Added

Selling Price

Cost of materials/

Components

Value Added

- =

Growth

Survival

Providing a service

Conflict in Business

Conflict in Business

Groups involved in Business

Business Stakeholders

owners managers workers

consumers community government

Explain and provide examples for the following…….

The difference between wants and needs, with examples

Scarce resources Principle of opportunity costs Importance of specialization in

production Purpose of business activity Importance of different groups in

business activities.