topic 1

• When analysing markets, a range of assumptions are made about the rationality of economic agents involved in the transactions
• The Wealth of Nations was written

  1776
• Rational


  (in classical economic theory) economic agents are able to consider the outcome of their choices and recognise the net benefits of each one
• Rational agents will select the choice which presents the highest benefits
• Consumers act rationally by

  Maximising their utility
• Producers act rationally by

  Selling goods/services in a way that maximises their profits
• Workers act rationally by


  Balancing welfare at work with consideration of both pay and benefits
• Governments act rationally by


  Placing the interests of the people they serve first in order to maximise their welfare
• Rationality in classical economic theory is a flawed assumption as people usually don't act rationally
• Marginal utility


  The additional utility (satisfaction) gained from the consumption of an additional product
• If you add up marginal utility for each unit you get total utility
• A business is a decision-making organization involved in the process of using inputs to produce goods and/or services
• Inputs of a bakery business

  • Labour
  • Raw materials
  • Equipment
  • Machinery
• Processes of a bakery business

  • Mixing
  • Kneading
  • Baking
  • Packaging
• Outputs of a bakery business

  • Bread
  • Cakes
  • Pastries
  • Delivery
• For a business organization to operate effectively, tasks must be carried out by functional areas (i.e. departments)
• These departments are interdependent (i.e. they must work together to reach the organization's goals)
• Human resources


  Manages the personnel of the organization
• Personnel issues managed by human resources

  • Workforce planning
  • Recruitment
  • Training
  • Appraisals
  • Dismissals
  • Redundancies
  • Outsourcing HR strategies
• Finance and accounts


  Manages the organization's money
• Marketing


  Responsible for identifying and meeting the needs and wants of customers
• Key functions of marketing

  • Product
  • Price
  • Place
  • Promotion
  • People
  • Processes
  • Physical evidence
• Operations management


  Responsible for the process of converting raw materials and components into finished goods, and the process of providing services to customers
• Businesses can be classified according to the stage of production they are engaged in, known as sectors of an economy
• Primary sector


  Businesses involved in the extraction, harvesting and conversion of natural resources
• Businesses from the primary sector


  • To be provided
• Secondary sector


  Businesses involved in the manufacturing or construction of products
• Businesses from the secondary sector


  • To be provided
• Tertiary sector


  Businesses that specialize in providing services to the general population
• Businesses from the tertiary sector


  • To be provided
• Quaternary sector


  Businesses involved in intellectual, knowledge-based activities that generate and share information
• Businesses from the quaternary sector


  • To be provided
• The chain of production links all the production sectors by tracking the stages of an item's production from the extraction of raw materials all the way through to it being delivered the consumer
• Value is added to the item as it moves through each sector in the chain of production
• The chain of production from cocoa beans to chocolate


  • Cocoa beans have value added to it as it is increasingly processed
• An entrepreneur is an individual who plans, organizes and manages a business, taking on financial risks in doing so
• Characteristics of entrepreneurs


  • Taking substantial risks
  • Having a vision for the business
  • Rewarded with profit
  • Responsibility for employees
  • Failure may result in personal costs
• Commonly encountered challenges for new businesses

  • To be provided
• Opportunities for starting up a business (GET CASH©)

  • Growth
  • Earnings
  • Transference and inheritance
  • Challenge
  • Autonomy
  • Security
  • Hobbies
• Concept-based learning in Business Management structures facts, skills and concepts