IGCSE BUSINESS

STUDIES
Unit 1 Business Activity
Chapter 1: The Purpose of Business Activity

In this unit you will

learn.

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 FEW FACTORS OF PRODUCTION!

Land

Labour

Factors of Production
Capital

Enterprise

Land

All of the natural resources provided by nature

Labour

All peoples 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
Land

Labour

Factors of Production
Capital

Enterprise

Limited in Supply

Factors of Production
12

rewards for the factors of production

Each of these factors of production is

paid by business

Can you think what we call the payments

for the other factors?

e.g. The payment for land is rent

Labour
Capital
Entrepreneurs

wage/salary
interest
profit

easilyinteractive.com 2006-9

10/10/15

Real Economic Problem

Unlimited
Wants

Limited
Resources

Scarcity

Limited Resources:
Choice
Individual

Business

Government

Summary Economic
Problem

Limited Resources
Production 200 years ago
1

Joe cuts
the wood

He
assembles
the table

Joe polishes
the table

Joe delivers the table on a

horse and cart

Limited Resources
Modern Day Production
1

The wood for 20 tables is cut

with a specialist machine

Carpenters assemble the

tables

The tables are finished in the

polishing department

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?

Unlimited wants
4 factors of production

Scarcity

Limited resources unlimited wants

Choice

Resources in limited supply to make goods and

services

Opportunity Cost

Specialisation

Improves efficient use of resources

Business Activity

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.
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.