Business Activities: Needs, Wants, and Opportunity Cost
Explore the fundamental concepts of needs, wants, scarcity, and opportunity cost in business activities. Learn about factors of production, value addition, and key vocabulary in economics. Discover how businesses combine resources to create products, satisfy wants, and generate profits.
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Presentation Transcript
G10 Business - The Purpose of Business Activity
The Economic Problem: Needs & Wants A need is something we must have like food, water & clothing. A want is something we desire but can live without like jewellery & holidays abroad. Activity: Make a list of your personal needs and wants. Limit your wants to 10 items.
The Economic Problem Wants are infinite, but resources are finite. This creates scarcity. Because of scarcity, we have to make choices. When making a choice, the next best alternative we had to give up, is called the opportunity cost.
Opportunity Cost Activity What could be the opportunity cost of using some land to build a restaurant? What could be the opportunity cost of spending 400RMB on Nike T-shirt?
Factors of Production Four resources are needed to produce products: Land = Natural resources provided by nature e.g. land, forests, fisheries Labour = The efforts and skills of people Capital = Finance, machinery and equipment Enterprise = The risk-taking ability of the person who brings together the resources to produce a product.
What do business enterprises do? Combine the factors of production to make products (goods or services) which will satisfy people s wants. Businesses add value to the factors of production when they create products. This enables them to make profits. Businesses employ workers and pay them wages, this allows them to consume products made by other people.
Added Value The difference between the selling price of a product and the cost of producing it. Eg A tailor buys cotton for $2. They make a shirt that sells for $7. What is the added value?
Key vocabulary Needs Wants Scarcity Factors of production Opportunity cost Economic problem Added value Products Profit Land Labour Capital Enterprise Goods Services
