Unit 1 – Business Structure,

Objectives and External Influences

• What is business?
– Business is busy-ness.

It involves
– Organising resources
– Producing goods and services
– Selling products
– Managing business activities and customers
Needs and Wants
• Need:
“Need is a good or service essential for living”
Examples ?

• Want:
“Want is a good or service that people want but is not
essential for everyday life and work”
Examples ?
Wants are unlimited
 Factors of Production
1. Land
The general term includes the land itself and all the
renewable and non-renewable sources of nature.
2. Labour
Manual and skilled labour make up the workforce of the
business.
3. Capital
The finance needed to set up a business and pay for its
continuing operation. Also the man-made resources used in
production.
4. Organisation/Enterprise
The driving force provided by risk-taking individuals, that
combines the other factors of production into producing
goods and services.
Economic Problem
• The economic problem arises when there are unlimited
wants but limited resources.

• Unlimited wants lead to the economic problem.

• Economic Problem leads to Scarcity.
 Demand and Effective Demand
• Demand:
The want for a product creates its
demand.

• Effective Demand:
Demand for a product that is backed
up by an ability and willingness to ay
for it.
 Cost and Opportunity Cost
• Cost:
– The financial cost of a product.

• Opportunity Cost
– The cost of one item in terms of next
best alternative that must be foregone.

• Example ???
 Market & Types of Prodcuts
• Market:
A market exists where buyers and sellers communicate in
order to exchange goods and services.

 Customers buy the goods and services.

 Consumers buy and use the goods and services to satisfy their
wants and needs.

Types Of Products:
1. Consumer Goods
2. Consumer Services
3. Capital Goods
4. Capital Services
 Specialisation
“The tendency of an individual, business, region or
country to produce certain goods or services.”

• Division of labour:
Specialisation of labour in one type of activity e.g.
accountancy or operating a computer.
 Specialisation (contd.)
• Advantages:
1. People concentrate on task they do best.
2. Skills are improved through repetitive working.
3. Time is saved.
4. Organisation of production becomes easier and productive.
• Disadvantages:
1. Work can become tedious and boring.
2. Problems can occur in dependent stages.
3. Over-specialisation causes problems when the demand changes.
 Classification of Business Activity
It is often classified as the type of production that takes
place.

1. Primary Sector:
Extraction of raw materials from the earth – mining,
quarrying, fishing, agriculture, forestry.

2. Secondary Sector:
Processing of raw materials into finished or semi-finished
products – manufacturing.

3. Tertiary Sector:
Service industries – leisure, transport, finance, distribution,
retailing, wholesaling, communications.
• Business Activity

• Produces and output – good or service

• Goods and services are consumed.
• A number of business functions may be carried
out.
• Business can be affected by external factor.