Business Studies All topics

TOPIC 1: Understanding Business Activity

Need: Something we have to have to live (eg. Food, water, clothe)

Want: Something we desire but don’t necessarily have to have (eg. Jewelry, holidays abroad)

The economic problem – The basic economic problem is that there are not enough resources to meet the needs and wants of customers

Business makes what you need and want

Wants are unlimited, however, resources are limited. This creates Scarcity. Because of scarcity, we have to make choices. When making a choice, the next best alternative we had to give up is called the opportunity cost

Unlimited wants + Limited Resources = Scarcity

Factors of Production

-Land = Physical space

-Labour = Human input

-Capital = Money invested in a business

-Enterprise = person who has the idea

Specialisation = when each worker specializes in some part of the production process 

It is important to use the resources we have in the most efficient ways. This dividing up of the production process into different tasks is called division of labour

Specialisation leads to Efficiency

Unlimited Wants  Limited Resources  Scarcity  Opportunity Costs  Specialisation 

Why we have businesses? 

To combine the factor of production (resources) to make products (goods/services) that will satisfy people’s wants

-Business add value to the factors of production

-They do it because they want to make money (profit)

-Businesses employ workers and pay them wages, this allows them to consume products made by other people

Primary – first sector (natural resources) – extraction of raw materials from the earth  mining, farming

Secondary – Second sector – production – takes resources from primary and turn them into finished goods  factories, construction

Tertiary – Service  leisure, transport, finance, distribution, retailing, wholesaling

In many developed economies, such as the UK and Canada, there has been a decline in the importance of manufacturing industry or the secondary sector, since the 1970s. This decline is referred to as de-industrialization.

However, in developing countries, such as China and India, the relative importance of the secondary sector has increased since the 1980s, compared to the primary sector

Developed economies moved into the Tertiary Sectors

Countries over time move from Primary  Secondary, Secondary  Tertiary

Relative importance of economic sectors

-Usually the 3 sectors of the economy are compared by:

oPercentage of the country’s total number of workers employed in each sector

oValue of output of goods and services and the proportion this is of national output

Mixed Economy

Private sector: Owned by businesses. Not owned by Government but by private individuals.

Public sector: Owned by the Government and state-owned businesses. 

oGovernment take taxes to 

Build Infrastructure (transport, road etc.)

Pay teachers in public schools/ build public schools

Build hospitals

Police

military

Examples of Public Sector:

> Schools, Hospitals, Street Lights, Refuge Collection, Post Office, military, police

Government thinks that:

Everyone has a right to a certain standard of living so they provide education, medicine to the less wealthy. 

Objectives for Public Sector

•Access – available to…