Business Notes

Chapter 1
Business is the activity of making one's living
or making money by producing or buying and
selling products (such as goods and services).
Simply put, it is any activity or enterprise
entered for profit.

The economic problem: Needs, Wants and

scarcity.

Needs
A need is a service or good essential for living
such us food, clothes and drinkable water.
Wants
It is a good or service people would like to
have but is not essential for living like the
newest car or phone.
The economic problem
There are unlimited wants but limited
resources to produce the goods or services to
satisfy those wants. This creates scarcity.
Factors of Production
The factors of production are:
  Land: This refers to all thee natural
resources such as oil, gas, metals, etc.
 Labour: The available number of people
to make products
 Capital: It is the finance, Machinery and
equipment needed for the manufacture
of this goods.
 Enterprise: It is the skill and risk taking
abilities of the person who brings
together the resources or factors of
production together to provide a good
service. The people who do this are called
entrepreneurs.
Opportunity cost
We must decide which wants we will satisfy
and those we will not. All choices demand a
sacrifice. This leads to opportunity cost.
For example, should I take the bus to school
or use the money to buy the new sandwich at
school.

Textbook Definition
Opportunity cost is the next best alternative
given up by choosing another item.
Specialisation
It is when people or businesses concentrate
on what they are best at doing
Division of labour
It is when the production process is split up
into different tasks done by different groups
of people.

LIMITED RESOURCES= ECONOMIC

PROBLEMS= UNLIMITED WANTS= SCARCITY=
CHOICE IS NECESSARY= LEADS TO
OPPORTUNITY COST.

Chapter 2
STAGES OF ECONOMIC ACTIVITY

Primary: The business sector that works raw

materials or natural resources.
E.g. Fishing, farming, mining, etc.
Secondary: The business sector that turn
these raw materials into goods.
E.g. Car manufacturing, shoe making, etc.
Tertiary: This sector provides goods for
consumers and other businesses
E.g. Telecom, insurance, schools, etc.

Relative Importance of Economic Sectors

The three sectors are usually compared in a

country by:
 Percentage of the country’s total number
of workers employed in each sector
Or
 Value of output of goods and services and
the proportion this is of total national
output.
In some countries, primary industries such as
farming and mining have more employees
than manufacturing or service industries.
These countries are usually developing
countries- where manufacturing industries
have only recently been established. Due to
the lack of demands of services such as
transport, hotels and insurance. In
countries with well-established
manufacturing industries, the secondary
and tertiary sectors are more likely to have
 more employees than the primary sectors.
In economically developed countries,
manufactured goods are brought in from
other countries and more workers are
employed for the service sector. The output
of tertiary sector is often higher than that
of the other two sectors. Those countries
are usually called most developed
countries.

Changes in sector Importance

In developed economies, there has been a

decline in the importance of manufacturing
industry since the 1970s. The tertiary sector
in the UK now employs well over 70 per
cent of all workers. The decline in the
manufacturing or secondary sector of industry
is called de-industrialisation. In China and
India, the relative importance of the
secondary has increased since the 1980s,
compared to the primary sector. In both
countries, however, the tertiary industries are
now increasing rapidly. There are several
reasons for changes in the relative importance
of the three sectors.
 Sources of some primary products
become depleted. This has been true for
Somalia with the cutting down of most of
its forests.
 Most developed economies are losing
competitiveness in manufacturing to the
newly industrialised countries such as
Brazil, India and China.
 As a country’s total wealth increase and
living standards rise, consumers tend to
spend a higher proportion of their
incomes on services such as travel and
restaurants than on a manufactured
product produced from primary
products.

Mixed economy
Nearly every country in the world has a
mixed economy with a:
 Private sector – Business not owned by
the government. These businesses will
make their own decisions about what to
 produce, how and the price. Most
private businesses aim for profits.
 Public sector – government or state
owned and controlled businesses and
organisations. The government or other
public authority, makes decisions about
what to produce, how, and the price.
Some goods or services are provided free
of charge because public sector
businesses do not aim at making profits.
Business activities usually found in the
public Sector
 Health
 Education
 Defence
 Public transport
 Water supply
 Electricity supply

Mixed Economies – Recent changes

In recent years, many governments have
changed the balance between the private and
public in their economies by selling public
businesses to private businesses. It is called
privatisation. In many European countries and
Asian countries, the water supply, electricity
supply and public transport systems have
been privatised. They do this because private
sector businesses have proven to be more
efficient which might be because they aim at
making profits and therefore they try to
deliver the best possible service.

Chapter 3
Enterprise and Entrepreneurship

An entrepreneur is a person who sets up a

business or businesses, taking on financial
risks in the hope of profit.

Benefits of being an Disadvantages of

Entrepreneur being an
Entrepreneur
 Able to put your  Risk – Many new
own ideas into entrepreneurs’
practice. businesses fail,
 May be profitable especially if there
and the income is poor planning.
might be higher  Capital –
 than working as entrepreneurs
an employee. must put their
 Able to make use own money into
of personal the business and
interests and possibly find other
skills. sources of capital.
 Independence –  Lack of knowledge
able to choose and experience in
how to use time starting and
and money. operating a
 May become business.
famous and  Opportunity cost
successful if the – lost income
business grows. from not being an
employee of
another
established
business

Why Governments support business start-ups

Most governments offer support to

entrepreneurs to encourage them to create
more businesses. There are several reasons
why support is given.
  Reduced unemployment – new
businesses will often create jobs.
 Increase competition – new businesses
give consumers more choices and
compete with already established
businesses.
 Increase output – The economy benefits
from increased output of goods and
services.
 Benefit society – Entrepreneurs may
create social enterprises which offer
benefits to society other than jobs and
profits.
 Can grow Further – All large businesses
were small once.

Type of support given by Governments

Business start-ups Governments often

need: give support by:
Business idea and Organising advice and
help. support sessions
offered by
experienced business
people.
Premises ‘Enterprise zones’,
which provide low-
cost premises to start-
up businesses
cs

Why do businesses stay small

Types of industry the businesses operates in

Industrys like hairsalons barbershops and

more stay small because they offer
personal services and specialised products.

Marke size

If the amount of costumers are small and the

area your in has a small population your
businesses would stay small.
Owners objectives

Some owners prefer to keep there businesses

small.because they are focusing on
 controling there small business,knowing
there customers and the employees.

Why do some businesses fail.

Poor management
This is a common case of new businesses
failures.lack of experience an lead to bad
decisioning like bad businesses location
with high cost but low demand.

Failure to plan for change

The business enviroment always changing.this

adds risk and uncertainty of operating a
business.

Poor financial managment

Shortage of cash mean that lack of liqudity

workers,suppliers,landlords and goverment
cant be paid what they are owed.

Over expansion
When a business expands to quickly it can
lead to big problems of managment and
finance.

Risk of new business start up

Many businesses fail due to lack of finacial

and other resources and research.in
addition,the owner of a new business may
lack experiance and business and decision
making skills of managers who work for
larger businesses.

CHAPTER FOUR

Business organisations: the pivate sector

There are five froms of the businesses
organisation.
Sole trade
Partnerships
Private limited companies
Public limited companies
Co operatives
Sole trade{a business owned by one person}

Its the most common form of business

organisation. It is a business owned and
operated by just one person.the owner is
the sole propertier.
 The owner must register with and send
annual accounts to the goverment tax
office
 The name of business is significant

Limited liability
Means that liability of shareholders in a
company in limited to the amount they
invested.
Unlimited liability
Means that the owner of the business can be
held responsible for the depts of the business
they own.

Business topics mid term

Opportunity cost
Factors of prodyction
Stages of economiv activitys
Enterprise
Business growth
Types of business organisation