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1.1 Business Activity 99
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GCE (O levels) 03 3
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Chapter 1: Business activity
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● the concepts of needs, wants, scarcity and- opportunity cost
● the importance of specialisation t ri
● the purpose of business activity h
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andKhow added value can be increased
● the concept of adding value n

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Needs and Wants
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● Needs: those things you think are necessary
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clothing, shetler etc.
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● Wants: things you would like to behable to buy and own; for e.g. a phone, a
bike, a house etc. n K
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● Can we satisfy everyone’s needs and wants with money?
● Printing more moneyh
e does not produce more goods and services. It will
Rrising so more goods cannot be afforded – you just pay
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just lead to prices
usame amount of goods
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more for the
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Scarcity: the economic problem; cause 9 9
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● Factors of production are limited; Land, Labour,0 Capital and Enterprise.
● Land: all the natural resources used for t ri
production.
● Labour: number of people available h a
to work.
● Capital – this is the finance,n K and equipment needed for the
machinery
manufacture of goods. a
h mrisk taking, idea or willingness to carry out
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● Enterprise: Entrepreneur,
R
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business activity.
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Scarcity: the economic problem; cause 9 9
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The cost of forgoing the next
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best alternative.
hat
Think about scarcity? n K
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Specialisation
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● The best and effective use of limited resources because factors of
production are limited.
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● Specialised machinery and technologies are now widely available
● Increasing competition means
a n that businesses have to keep costs low

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Specialisation
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Specialisation: division of labour 99
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Purpose of business activity
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● Wants, Scarcity, Opportunity cost, Specialization.

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● Answer to all problems lies in business activity.

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● The purpose of all businesses is to combine the factors of production to
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make products which will satisfy people’s wants. These products can
either be goods – physicalaitems such as cars and shoes which we can
hmcan be services, such as insurance, tourism or
e
touch and see – or they
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banking.
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Purpose of business activity
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● Business activity combines scarce factors-of production to produce goods
and services. t ri
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● Produces goods and services which
aare needed to satisfy the needs and
wants of the population. n K
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mby other people.
● Employs people as workers and pays them wages to allow them to
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consume products made
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Value addition
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How can business increase added 9 9value?
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● Increase selling price but keep the cost of -materials
t r
be possible if the business tries to createi a higher quality image for its
product or service. h a
● Reduce the cost of materialsnbut Kkeep the price the same. A building firm
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could use cheaper wood, bricks and other materials when constructing a
home or shop.
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End of lesson ri -
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Thank you/Questions
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