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Transcript of IGCSE Business Studies 1.1 Business Activity i-study.co.uk.
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IGCSE Business Studies
1.1 Business Activity
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Business Activity
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Business Activity
• A resource is any unfinished product that is used to create another product
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Business Activity
What is a business?
A business is an organisation that combines inputs called Factors of Production to create a finished good or service. These may operate in the private or public sector of the economy.
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Business Activity
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Business Activity
• The Factors of Production are essential to any business. They are:
1)Land – anything in or on the earth. Natural resources
2)Labour – physical and mental effort3)Capital – goods that createother
goods4)Enterprise – the skill of the risk
taker / owner
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Business Activity
• The Basic Economic Problem is that our needs (warmth, shelter, clothing, food and water) and wants are infinite but our resources (factors of production) are scarce.
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Business Activity
• Opportunity Cost
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Business Activity
• Opportunity Cost is the cost of the next best alternative given up when a decision is made.
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Business Activity
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Business Activity
• Because resources are ______, firms have to make a ______ when deciding what to produce. The next best option they give up when they do this is known as their _______ _____. The problem is that firms must make the best decision possible because wants and needs are _______ yet they do not have unlimited _________.
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Business Activity
• The three Basic Economic Questions
1) What to produce2) Who to produce it for3) How to produce it
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Business Activity
• Resource allocation: We decide…
1) What to produce - profit maximizers
2) Who to produce it for – utility3) How to produce it - efficiency
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Business Activity
• Specialisation– Individual: Worker Specialisation – Business: Firm specialisation– National: Company specialisation
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Business Activity• Specialisation can help increase our
PPC
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Business Activity
• Why we are able to specialise
– Globalisation– Trade– Technology– Education
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Forms of Specialisation
• Workers often specialize by adopting a practice known as division of labour. This is when each worker is given a specific task which contributes to the final product
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Business Activity
Advantages Disadvantages
Saves Time Very boring
Plays to workers’ strengths Over reliance
Lower costs Loss of jobs owing to technology
Greater output / efficiency
• Specialisation
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Business Activity
• So we know firms aim to be as efficient as possible to gain as much from their scarce resources as possible. They often do this through specialisation. They aim to make a profit. To maximize their profits they must add value to their products
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Business Activity
Added Value
All firms incur costs. To make a profit, a firm must make sure that revenue is higher than costs. They must add value to the resource they paid for.
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Business Activity
• How a firm adds value to its product– Marketing / Brand image– Reducing waste– Increasing efficiency through
specialisation– Creating a unique selling point (USP)– Packaging– Geographical location
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Business Activity• Some firms do not seek to add value
in order to maximize profit. They may have other aims e.g:
Other aims
Charity
RevenueGrowth
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Business Activity
Review – why business activity is necessary. Firms:
• Solve the basic economic problem by allocating resources
• Combine inputs to create desirable outputs
• Work to maximize efficiency by allocating resources
• Provide jobs and incomes• Add value to products