Business activity

• Needs


  Essential e.g. shelter or food
• Wants


  Desires which are non-essential, even if consumers consider them to be essential e.g. Nike trainers
• Scarcity


  The problem that requires choices to be made by producers, consumers, workers and governments about the best (most efficient) use of resources
• Factors of production


  Land, labour, capital and enterprise
• Opportunity cost


  The loss of the next best alternative when making a decision
• Opportunity cost examples


  • When a consumer chooses to purchase a new phone, they may be unable to purchase new jeans
  • When a producer decides to allocate all resources to producing electric vehicles, they may be unable to produce petrol vehicles
  • When a government decides to provide free school meals, they may be unable to fund some rural libraries
• Specialisation


  When people and workers focus on one particular role or task and thereby gain significant skill in doing it
• Division of labour


  The separation of a work process into a number of tasks that are completed by a separate person or group of persons
• Specialisation


  • Results in higher output per worker which increases productivity
  • More common due to specialised technology, machinery and increasing global competition
  • Occurs on individual, business, regional and global levels
• Purpose of business activity

  The activities that businesses engage in to produce goods or services that meet customer needs while adding value
• The process of adding value

  Taking raw materials and using them in such a way that the end product created is worth more than the cost of the raw materials used to create it
• Methods of adding value

  • Convenience
  • Branding
  • Quality
  • Design
  • Unique Selling Points (USPs)
• Businesses may use several methods of adding value, and the increase in selling price must outweigh the costs associated with the methods of improving the product