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Chapter 1.1

The document discusses the purpose and nature of business activity, emphasizing the production of goods and services to satisfy consumer demand. It covers key concepts such as needs, wants, scarcity, opportunity cost, and the importance of specialization in business. Additionally, it explains how businesses add value through branding, service quality, and product features.

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Mae L
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6 views17 pages

Chapter 1.1

The document discusses the purpose and nature of business activity, emphasizing the production of goods and services to satisfy consumer demand. It covers key concepts such as needs, wants, scarcity, opportunity cost, and the importance of specialization in business. Additionally, it explains how businesses add value through branding, service quality, and product features.

Uploaded by

Mae L
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 17

Chapter 1.

1
The Purpose and nature
of Business Activity
Objectives
• To learn about
• Needs, wants, scarcity and opportunity cost
• The importance of specialisation to bsuinesses and
consumers
• The purpose of business activity
• What is meant by “added value”
• How a business adds value
Introduction
• The business world is all around us

• Businesses provide us:


• consumers, with all the goods and services that we
need and would like to have

• We will look at how businesses turn resources into


goods and services to meet all our needs and wants
The purpose and nature of business activity

Business activity : the purpose of producing


goods and services to satisfy consumer demand

Need: a good or service which is essential to


living (Clothing, food, water, shelter)
Want: a good or service which people would
like, but is not essential for living (luxury cars,
holidays with friends, expensive watch)
Activity 1.2 (page 10)
Scarcity and opportunity cost
Economic problem: unlimited wants cannot be met
because there are limited factors of production. This
creates scarcity.

Factors of production: the resources needed to


produce goods and services - land, labour, capital and
enterprise.
• Land is all natural resources such as minerals, ores,
fields, oil and forests
• Labour is the number of people available to work
• Capital is machinery, equipment and finance needed
for production of goods and services
• Enterprise is people prepared to take the risk of
setting up businesses - they are known as
entrepreneurs
• Scarcity : there are not enough goods and services to
meet the wants of the population

• Opportunity cost: the benefit that could have been


gained from an alternative use of the same resource
Activity 1.3 (page 12)

Case Study (page 13)


Importance of specialisation
• Specialisation: people and business concentrate on
what they are best at
• Division of labour: production is divided into separate
tasks and each employee does just one of those tasks
Purpose of business activity
• Business produce different types of goods and
services.
• Consumer goods
• Consumer services
• Capital goods
Consumer goods : products whihc are sold to final
consumer. They can be seen and touched, for example
computers and food.

Consumer services: non-tangible products such as


insurance service, transport

Capital goods: physical goods, such as machinery and


delivery vehicles, used by other businesses to help
produce other goods and services
How businesses increase added
value
• Branding
• Excellent service quality
• Product features
• Convenience
Activity 1.5 (page 17)
Chapter checklist
• Business activity combines theh factors of production to produce
goods and services that meet consumer needs and wants
• The economic problem and the problem of scarcity are due to
unlimited needs and wants of consumers which cannot be met by
businesses because they have limited factors of production. Choices
must be made and this creates an opportunity cost
• Specialisation of both labour and capital helps businesses to produce
more goods and services at a lower cost
• Businesses add value by talking raw materials and turning these into
goods and services that they can sell to consumers.

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