IGCSE BUSINESS STUDIES
Unit 1 – Business Activity
Chapter 1: The Purpose of Business Activity
In this unit you will learn…….
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The economic problem of unlimited wants and
limited resources
The factors of production
The development of economic activity and the use
of specialization
What is meant by a business
The most common aims of business
The different groups involved in business activity.
Classify these.
Needs
Wants
Needs and Wants

Wants
›

Needs
›
›
Essential goods or
services necessary for
living.
Satisfy the basic things
for life.
›
Non-essential goods
and services that
people would like to
have.
Interests & Tastes
Make your list
Needs
Wants
Limit your wants to no more than 25 items please!
The Economic Problem

The shortage of goods & services
 TOO
Land
FEW FACTORS OF PRODUCTION!
Labour
Factors of Production
Capital
Enterprise
Land
All of the natural resources provided by nature
Labour
All people’s efforts to make products
Capital
All finance, machinery & equipment in manufacturing products
Enterprise
All people that have skills & have risk-taking ability  factors of production  produce
good or service
Economic Problem
Labour
Land
Factors of Production
Enterprise
Capital
Limited in Supply
Factors of Production
rewards for the factors of production
12
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Each of these factors of production is paid by
business
 e.g.
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*
The payment for land is rent
Can you think what we call the payments for the
other factors?
 Labour
wage/salary
 Capital
interest
 Entrepreneurs
profit
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22/03/2016
Real Economic Problem
Unlimited
Wants
+
Limited
Resources
=
Scarcity
Limited Resources: Choice
Individual
Business
Government
Summary – Economic Problem
Limited Resources
Production 200 years ago
1
2
Joe cuts
the wood
He
assembles
the table
3
Joe
polishes the
table
4
Joe delivers the table on a
horse and cart
Limited Resources
Modern Day Production
1
2
The wood for 20 tables is cut
with a specialist machine
Carpenters assemble the
tables
3
The tables are finished in the
polishing department
4
A transport company collects the tables to
deliver them to furniture retailers
Making the best use of limited resources

Specialization / Division of Labour
 Production
Process
 Different
tasks split up
 Workers
performs a task
Specialization
Division of Labour

Advantages
 Specialised
task training
 Increases efficiency
 Increases output
 Save time

Disadvantages
 Bored
workers
 Possible drops in efficiency
 Production stopped due to absence
Why business activity is needed?
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
Unlimited wants
4 factors of production
 Resources

Scarcity
 Limited

in limited supply to make goods and services
resources – unlimited wants
Choice
 Opportunity

Cost
Specialisation
 Improves
efficient use of resources
Business Activity
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Combines s_____ f_____of p_______ in order to
produce g_____ and s_______.
Produces those goods and services which are
needed to s______ the n______ and w_____ of
the p___________
E_______ people as worker and pays them w____
/ s______ to allow them to consume p_______
made by other p________.
Aim of Businesses
Combine factors of production
 Produce products
 satisfy peoples wants

Classification of Products

Goods
 Physical
items
 Tangible
 Touch and see

Services
 Intangible
Business Objectives

Aim / Target to work towards
 Make
a Profit
 To increase added value
 To expand the business
 To achieve business survival
 To provide a service
Profit
Value Added
Value
Added
Selling
Price
-
Cost of
materials/
Components
=
Growth
Survival
Providing a service
Conflict in Business
Conflict in Business
Groups involved in Business
owners
managers
workers
Business
Stakeholders
consumers
community
government
Explain and provide examples for
the following…….
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The difference between wants and needs, with
examples
Scarce resources
Principle of opportunity costs
Importance of specialization in production
Purpose of business activity
Importance of different groups in business
activities.