Chapter 1: Business Activity
Key Concepts
Needs vs. Wants:
•Needs are essential for survival (e.g., food, water).
•Wants are non-essential but desirable (e.g., luxury items).
Economic Problem:
Limited resources are unable to meet unlimited wants, creating scarcity.
Core Definitions
1. Factors of Production: Resources needed to produce goods and services:
•Land: Natural resources (e.g., oil, minerals).
•Labour: Human effort in production.
•Capital: Tools, machinery, and finance.
•Enterprise: Risk-taking and management by entrepreneurs.
2. Opportunity Cost: The next best alternative forgone when making a decision.
-> Why Specialisation Matters
Definition: Focusing on tasks one is best at to improve efficiency.
Advantages:
•Higher productivity.
•Lower costs due to expertise.
Disadvantages:
•Can cause boredom in repetitive tasks.
Adding Value
Definition: The difference between a product's selling price and the cost of raw materials.
How to Add Value:
1. Increase the selling price while keeping costs stable.
2. Reduce costs without affecting quality.
Key Concepts
Needs vs. Wants:
•Needs are essential for survival (e.g., food, water).
•Wants are non-essential but desirable (e.g., luxury items).
Economic Problem:
Limited resources are unable to meet unlimited wants, creating scarcity.
Core Definitions
1. Factors of Production: Resources needed to produce goods and services:
•Land: Natural resources (e.g., oil, minerals).
•Labour: Human effort in production.
•Capital: Tools, machinery, and finance.
•Enterprise: Risk-taking and management by entrepreneurs.
2. Opportunity Cost: The next best alternative forgone when making a decision.
-> Why Specialisation Matters
Definition: Focusing on tasks one is best at to improve efficiency.
Advantages:
•Higher productivity.
•Lower costs due to expertise.
Disadvantages:
•Can cause boredom in repetitive tasks.
Adding Value
Definition: The difference between a product's selling price and the cost of raw materials.
How to Add Value:
1. Increase the selling price while keeping costs stable.
2. Reduce costs without affecting quality.
