IGCSE Business Studies - Unit 1

THE NATURE OF

BUSINESS ACTIVITY

Unit 1.11

OBJECTIVES

• To define concepts of needs, wants, scarcity and

opportunity cost

• Explain the importance of specialisation

• State the purpose of business activity

• Identify the concept of adding value and how added

value can be increased

INTRODUCTION

• When you hear the term

business what comes to
mind?

Word Cloud

What comes to mind when you hear the term business?

THE PURPOSE AND NATURE OF

BUSINESS ACTIVITY

• Business activity provides consumers with goods

and services to meet our needs and wants.

WHAT ARE NEEDS AND WANTS?

• Needs: Essential for living (water, food, shelter,

clothing).

• Wants: Not essential but desired (phones, cars,

holidays).

ACTIVITY 1.1 – PERSONAL

WANTS

• Google Classroom

ACTIVITY 1.2 – BASIC NEEDS IN

A SMALL ISLAND COUNTRY

• Google Classroom

SUMMARY

• Businesses meet needs and wants, but it’s important to

differentiate between them.

• Understanding resource distribution is key to ensuring basic

needs are met.

SCARCITY AND OPPORTUNITY

COST

INTRODUCTION

THE ECONOMIC PROBLEM

• The real cause of the shortage of goods and services

is the too few factors of production.

• Factors of Production are those resources that are

needed to produce the goods and services.

THE ECONOMIC PROBLEM

• There are four factors of production

• Land – natural resources provided by nature

• Labour – the number of people available to work

• Capital – machinery, equipment and finance for production

of goods and services

• Enterprise – people prepared to take the risk of setting up

businesses

THE ECONOMIC PROBLEM

• There are just not enough goods and services to meet the

needs and unlimited wants of all consumers- this is the

economic problem. This creates scarcity.

• Scarcity is a term that describes the gap between the

amount of an item that is wanted and the resources

needed.

• This leads to making a choice.

WHICH ONE WOULD YOU

PREFER?

WHAT DOES THIS SAY

• Whichever decision you make will mean you have to give up

chance of having the other.

• The next best alternative you give up is known as the

opportunity cost of your decision.

ENDING ACTIVITY

Multiple Choice

What is opportunity cost?

• Opportunity cost is the value of the next best alternative that is given up when making a choice.
• Opportunity cost is the benefit received from the best alternative chosen.
• Opportunity cost refers to the financial cost of a decision only.
• Opportunity cost is the total cost of all alternatives considered.

Fill in the Blank

The four factors of production are: land, labour ____ and enterprise