Chapter 1: Understanding business activity

1. Factors of production

1.1. Land

1.1.1. cover all natural resources provided by nature

1.2. Labour

1.2.1. number of people to make products

1.3. Capital

1.3.1. stuff needed for manufacture

1.4. Enterprise

1.4.1. skill and risk taking ability of person to produce good service

2. Adding Value

2.1. selling price less cost of brought-in materials/ components

2.2. Increase price

2.3. Reduce material costs

3. Wants and Needs

3.1. Wants- a good or service which people would like to have, which is not essential for living.

3.1.1. E.g a lion, A mansion, A private plane,etc.

3.2. Needs- a good essential for living.

3.2.1. E.g Clean Water, Shelter, Food, Clothes, etc

4. Economic Problem

4.1. Limited resources

4.1.1. land

4.1.2. labour

4.1.3. capital

4.1.4. enterprise

4.2. Unlimited wants

4.2.1. Scarcity

4.2.1.1. Choice is necessary

4.2.1.1.1. Leads to opportunity cost

5. The purpose of business activity

5.1. People have unlimited wants.

5.2. The resources needed to make goods are in limited supply

5.3. Scarcity resulted from limited resources and unlimited wants.

5.3.1. Lack of products to fulfil wants

5.4. scarcity result unlimited results due to unlimited wants

5.5. Specialisation improves the efficient use of resources

5.5.1. specialisation- the best use of limited supply