Understanding business activity

Understanding Business Activity​

By: Rei/Faith :D

The Economic Problem

need: a good or service essential for living

(e.g. water, shelter, food)

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want: a good or service people would like to have, but is not required for living

(e.g. cars, phone, laptop)​

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scarcity: ​the basic economic problem - when there are unlimited wants and limited resources

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Multiple Choice

What is a need?

• a good or service that people would like to have, but is not required for living

• a good or service essential for living

• when there is unlimited needs and wants and limited resources

• the next best alternative forgone by choosing another item

Fill in the Blanks

What is scarcity?

Multiple Choice

A want is something that is essential for living.

• True

• False

Opportunity cost

opportunity cost: ​the next best alternative forgone by choosing another item

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​SCARCITY → CHOICE → OPPORTUNITY COST

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e.g. you have RM90. You want to buy either a textbook or a bookbag, but you don't have enough for both. You already have an old bookbag, so you choose the textbook which you need for class. You forgo the bookbag to choose the textbook, which is an example of opportunity cost.

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Open Ended

Describe the nature of economic problem. (4M)

Factors of Production

land: natural resources that can be obtained from nature​

reward: ​rent

(e.g. minerals, oil, coal​)

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labour: ​the physical and mental efforts put in by the workers in the production process

reward: wages/salary

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​capital: the finance, machinery and equipment needed for the production of goods and services

​reward: interest​

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enterprise: the risk taking ability of the person who brings the other factors of production together to produce a good or service

​reward: profit​

Multiple Choice

What is labour?

• the risk taking ability of the person who brings the other factors of production together to produce a good or service

• the natural resources that can be obtained from nature

• the physical and mental efforts put in by the workers in the production process

• the finance, machinery and equipment needed for the production of goods and services. The reward for capital is interest received on the capital

Fill in the Blanks

What is the reward for land?

Multiple Choice

What is enterprise?

• the risk taking ability of the person who brings the other factors of production together to produce a good or service

• the natural resources that can be obtained from nature

• the finance, machinery and equipment needed for the production of goods and services

Fill in the Blanks

What is the reward for capital?

Specialization

specialization: when a person or organization concentrates on a task that they are best at

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ADVANTAGES

1) ​workers are trained to do and specialize in a specific task, so it increases efficiency

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2) ​saves time and energy - production is faster

3) quicker to train labourers - workers do not need to be trained in all aspects of the production process

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4) ​skill development - workers can master their skills as they do the same tasks repeatedly

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DISADVANTAGES

1) ​monotonous/boring for workers since they are doing the same task repeatedly

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2) ​higher labour turnover as workers may demand for higher salaries and the company is not able to keep up with their demands

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3) ​over-dependency - if the worker(s) responsible for the task is absent, no one else can do the task, delaying the production process

Multiple Select

Advantages of specialization

• increased efficiency

• increased motivation

• skill development

• faster production

Multiple Select

Disadvantages of specialization

• Monotonous/boring for workers

• Workers may demand higher pay

• Overdependency

Purpose of Business Activity

​Business is any organization that uses all the factors of production (resources) to create goods and services to satisfy human wants and needs.

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Businesses attempt to solve the problem of scarcity, using scarce resources, to produce and sell those goods and services that consumers need and want.

Added Value

added value: ​the difference between the cost of materials bought in and the selling price of the product

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How to increase added value?​

1) ​Reducing the cost of production -

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But there will be problems that rise from both these measures. To lower cost of production, cheap labour, raw materials etc. may have to be employed, which will create poor quality products and only lowers the value of the product. People may not buy it. And when prices are raised, the high price may result in customer loss, as they will turn to cheaper products.

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You can also add value by:

1) ​branding

2) ​adding special features

3) ​providing premium services etc.