Business Activity
Business Studies Chapter 1
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The cause of shortage of goods and services is that there aren’t enough factors of
production to make all the goods and services that is needed/wanted.
Factors of Production:
1. Land (N) – All natural resources.
2. Labour (L) – People to produce
3. Capital (C) – Finance, machinery and equipment available
4. Enterprise (E) – Skill/risk-taking ability of a person who brings factors of production
together.
 Globally factors of production are limited and all needs/wants can never be met.
Unlimited Wants + Limited resources = Scarcity
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Due to limited resources and unlimited wants, we must choose what to make.
All choices involve giving something up. This is called opportunity cost.
Opportunity cost is the next best alternative given up by choosing another item.
Today, very few products are made by just one person. Specialization is common
because:
o Specialized machinery is widely available
o Increased competition forces businesses to try to bring costs down
o Most people can earn more/have higher living standards from being
specialized
Advantages
Trained workers excel in one task; increased
efficiency and output
Less time wasted from changing tools
Disadvantages
Workers become bored of monotonous
work
In absence of one worker, production line
may be halted
Quicker to replace workers as fewer skills
need to be taught
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The purpose of businesses is to combine the four factors of production to make
products to satisfy needs/wants.
o The products can be goods or services.
Businesses can be privately owned or by the government. They can have thousands
of owners called shareholders.
Specialization occurs when people and businesses concentrate on what they are best
at.
Division of Labour is when the production process is split up into different tasks and
each worker performs a task. It is a form of specialization.
Businesses combine factors of production to make products which satisfy wants and
needs.
Business activity is:
o The combination of scare factors
Saturday, July 22, 2023, by Jaiveer Talwar
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o Production of goods and services
o Employment of people
Added value is the difference between the selling and cost price of a product.
All businesses attempt to add value. If no value is added, other costs cannot be paid
for and no profit will be made.
Added value is important since the sales revenue should be greater than the cost of
goods/materials. If this happens;
o The business can pay costs (labour, etc.)
o The business can make a profit.
Added value can be increased by:
o Reducing costs
o Increasing selling prices
Saturday, July 22, 2023, by Jaiveer Talwar