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Business Activity - Coggle Diagram
Business Activity
Purpose of business activity
Following issues
Scarcity results from limited resources and unlimited wants
When resources scarce choice is necessary leading to opportunity cost
Factors of production are in limited supply
Specialization improves the efficient use of resources
Unlimited wants
Combine the factors of productions
Satisfy people´s wants with goods or services
Therefore this
Produces goods and services
Employs people
Combines scarce factors
Added Value
Businesses attempt to add value, if not
Other costs cannot be paid for
No profit will be made
Why is added value important
Can pay other costs
Sales revenue is greater than the cost of materials
Able to make profit
How could a business increase added value
Increase selling price but cost of materials is same
reduce cost of materials but price is same
The Economic Problem
There are needs and goods
things that you are interested in are goods
Mobile phones, TV, computers and all sorts of objects one is interested in
Important items are needs
Water, clothing, food, shelter
Four factors of production
Land
natural resources provided by nature
Labour
People available to make products
Capital
Finance, machinery and equipment needed for the manufacture of goods
Enterprise
Ability of the person who brings the other resources or factors of production together to produce a good or service
Specialization
Factors of production are in limited supply
Workers specialize on one product
Specialization is now very common because
Increasing competitions mean businesses have to keep costs low
Higher living standards can result from being specialized
Specialized machinery and technology are available
Division of labour
Each worker is a specialist at just one task
Increases efficiency
Less time is wasted
Production might be stopped by the absent of a worker
Workers can become bored and efficiency might fall
Limited Resources
We make choices every day
We have limited resources
All choices involve giving something up
Opportunity cost