Business Flash-Cards

Chapter 1

What is the cause of the economic problem?

 Unlimited wants + limited resources = Scarcity of Factors of Production

There are 4 Factors of Production:

• Land: Natural resources such as oil, gas, metals, fields and forests. Anything that nature has to provide.
• Labour: The efforts of peole needed to make products.
• Capital: Finance, machinery and equipment
• Enterprise: Risk taking ability of brining factors of production to produce a good or a service.

What are the main objectives in a business?

• To make profit.
• To increase added value.
• To expand.
• To survive.
• To provide a service to the community.

General Definitions:

• Scarcity: lack of products to fulfil the wants of people.
• Opportunity Cost: the best alternative given up by choosing another item. Example, If someone shooses to buy a car rather than go on holiday, the holiday becomes the opportunity cost.
• Division of Labour: Each worker does on specialised job. Same with specialisation. It is done in order to speed up the production progress.
• Specialisation: Resources are used to concentrate on producing one product. Same with division of Labour.
• Value Added: Selling price of product - cost in materials
• Stakeholders: Groups of people interested in the performance of a business, for example workers, sucstomers, sonsumers shareholders etc...

Advantages of Division of Labour:

• Workers are trained in one task and specialise in this, increasing efficiency.

Disadvantages of Division of Labour:

• Workers can become bored of repeating the same process all the time, eficiency might fall.
• If a worker is absent, no one might be able to replace him thus stoping production.

Revision Questions:

1) Define scarcity by referring to the economic problem. (3)

2) Define division of labour. (2)

3) Define value added. (2)

4) List the four factors of production and briefly explain them. (4)