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Flashcards in 1. Business Activity Deck (11)
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What is a 'Need'?

Good/service essential for living

Ex. Food, water, shelter, clothing


What is a 'Want'?

Good/service people would like to have but is not essential for living.

Ex. A designer handbag


EWhat is the economic problem?

The wants of people are unlimited, yet the resources needed are limited (scarcity)


What are the factors of production?

Resources needed to produce goods and services.

  1. Land
  2. Labour
  3. Capital
  4. Enterprise


Explain the factors of production

  1. Land: All natural resources
  2. Labour: People hired to work/produce a good or service
  3. Capital: Finance, equipment, machinery.. needed to produce food or service | Money invested into a business by the owner(s).
  4. Enterprise: Skill and risk-taking ability of the person/entrepreneur who combines all factors of production to produce a good or service


What is the difference between goods and services?

Goods are tangible objects/products while services are intangible products or actions provided by people or machines.


What is an opportunity cost?

It is the next best alternative given up by choosing another item.


Define 'Specialisation'

A method of production where a person/business focuses on the production of a limited scope of products or services in order to gain greater degrees of productive efficiency within the entire system of people/businesses.

When a person or business specialises and focuses on what they are best at.


What are the advantages and disadvantages of specialisation?

+ Increased efficiency and output
+Uniformity of Products
+Reduced Wastage of Resources

- Demotivation of Workers (insignificance or boredom)
- No Scope for Creativity
- Possible Delay of Work


What does 'Business Activity' do?

  1. Combines scarce factors of production
  2. Produces goods and services to satisfy people's needs and wants
  3.  Employs and pays people money so that they, in turn, consume goods and services from other businesses


What is added value and how do you add value to a product?

Difference between selling price and cost of resources or bought-in materials and components.

Value added to a product by a business

You can add value by:

  • Increasing selling price
  • Reducing cost of materials