BUSINESS

ACTIVITY
Chapter : 1
 ◦ To understand the concept and purpose of
business activity and opportunity cost.
◦ To understand the applicability of
LEARNING specialization in a business.
OBJECTIVES ◦ To understand the concept of adding value.
 ◦ •Business
◦ •Wants
◦ •Factors of production

KEY WORDS ◦ •Opportunity cost

◦ •Added value
◦ •Specialization
ACTIVITY
Identify goods and
services from your
school campus.
WHAT IS A NEED

◦ A NEED is a good or
service essential for
Living.
WHAT IS A WANT

◦Everyone will LIKE

TO HAVE but not
ESSENTIAL FOR
LIVING.
◦DO YOU HAVE
EVERYTHING YOU WANT ?
 OPPORTUNITY COST

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
THE ECONOMIC PROBLEM

LIMITED RESOURCES +
UNLIMITED WANTS = SCARCITY
FACTORS OF
PRODUCTION
◦ The real cause of the shortage of goods and services in a
country is the too few FACTORS OF PRODUTION.

◦ Factors of production are those resources needed to

produce the goods and services.
- Land
- Labour
- Capital
- Enterprise
Land
◦ All things supplied by nature.
◦ Natural resources used in production.
◦ e.g. fields, water, natural gas, oil, coal, minerals, trees……..
◦ The payment/reward for land is rent.
Labour
◦ The human element in the production process.
◦ e.g. employees, builders, carpenters, factory workers…..
◦ The reward for labour is wages.
Capital

Finance, machinery and equipment needed for the

manufacture of goods.

◦ The reward for capital investment is interest

 ENTERPRISE
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Four resources are needed to produce any product:

•Land = Natural resources provided by nature e.g. land, forests, fisheries

•Labour = The efforts and skills of people

•Capital = Finance, machinery and equipment

•Enterprise = The risk-taking ability of the person who brings together the resources to produce a product.
MAKING THE BEST USE OF
LIMITED RESOURCES -
SPECIALISATION
◦ Since our resources are limited, we need to utilize
them in the most efficient ways possible.
◦ When people and businesses concentrate on what
they are best at. Is called specialization.
DIVISION OF LABOUR
 ◦ •Increased output

Advantages of ◦ •Greater Efficiency

◦ •Quality of Work
specialization ◦ •Time saving
 Disadvantages of specialization

small task again and again - job

•Monotony becomes boring - the worker

loses interest in his work -
Boredom and monotony create
in work – mental fatigue which ultimately
spoils the quality of work.

•Lack of A worker performs only a part of

the total job. Therefore, no
individual can be held responsible
 •The aim of all business is to combine the factors of
production to make products (goods or services) which will
satisfy people’s wants.

Purpose of
Business •Businesses add value to the factors of production.

Activity
•Businesses employ workers and pay them wages, this
allows them to consume products made by other people.
ADDED VALUE
◦ The difference between the selling price of a product
and the cost of producing it.
◦ ADDED VALUE= Selling price of a product -
material and bought in cost
◦ Eg A tailor buys cotton for $2. They make a shirt that
sells for $7. What is the added value?
◦ ADDED VALUE= $ 7- $ 2 = $5
 DIFFERENCE
BETWEEN
VALUE ADDED
AND PROFIT
Click to add text
 (ADDED VALUE= Selling price of a product - material and
bought in cost)

1.Increase selling price but keep the cost of materials the

same.

How to increase This is possible by providing higher quality image than

before.

added value
2. Reduce the cost of materials but keep the prices the same.

But need to check whether the customers are ready to pay

the same price for a low quality product.