Business activity

• Opportunity cost is the next best alternative given up by choosing another item.
• Specialization occurs when people and businesses concentrate on what they are best at.
• Specialized machinery and technology are now available, increasing competition means that businesses have to keep costs low, and most people recognize that higher living standards can result from being specialized.
• Division of labour is when the production process is split up into different tasks and each worker performs these tasks.
• Advantages of division of labour include workers being trained in one task and specializing in it, creating efficiency and output, and less time being wasted moving from one workbench to another.
• Disadvantages of division of labour include workers becoming bored doing just one job, potentially leading to a fall in efficiency, and if one worker is absent and no one else can do the job, production may fall.
• A business combines factors of production to make products that satisfy people's wants.
• A business combines scarce factors of production to produce goods and services.
• A business produces goods and services which are needed to satisfy the needs and wants of the population.
• A business employs people as workers and pays them wages to allow them to consume products made by other people.
• Added value is the difference between the selling price and the cost of bought-in materials and components.
• Added value is important because it pays other costs such as labour costs and may be able to make a profit if these other costs total less than the added value.
• A business can increase added value by increasing the selling price but keeping the cost of materials the same, or by reducing the cost of materials but keeping the price the same.
• Low-priced materials might reduce the quality of the product and put off some customers from buying the product.