1.1 Business Activity
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- Created by: Advikaa
- Created on: 02-03-23 13:39
Needs
Essential goods and services that are necessary for living. For example- food, water
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Wants
Wants are non-essential goods or services that people would like to have. Eg- mansion, coke
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The economic problem
Human wants - > unlimited
Resources - > scare
So, businesses have to make choice
Resources - > scare
So, businesses have to make choice
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Scarcity
There are not enough goods or services to meet the unlimited wants of the people.
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Name the 4 factors of production
- Land
- Labour
- Capital -> equipment and machinery
-Enterprise -> people who set up the factors of production
- Labour
- Capital -> equipment and machinery
-Enterprise -> people who set up the factors of production
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Opportunity Cost
Opportunity cost is the next best alternative given up or foregone by choosing another item.
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Specialisation
Specialisation occurs when people and businesses concentrate on what they are best at doing.
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Efficiency
Efficiency is about making the best possible use of the resources.
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How can we increase efficiency?
Increase output with the same costs
OR
Decrease costs with the same output
OR
Decrease costs with the same output
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Division of labour
Division of labour is when the production process is split up into different tasks and each worker performs one task.
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Advantages of division of labour
Trained workers -> less time to finish
- more focus
-less errors
Efficiency increases -> resources are foused on their most productive use
-less waste
-less costs
- more focus
-less errors
Efficiency increases -> resources are foused on their most productive use
-less waste
-less costs
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Advantages of division of labour
Output increases -> workers are trained
-increases productivity (output/worker)
-increases productivity (output/worker)
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Disadvantages of division of labour
(business and employees)
(business and employees)
Workers get bored
- output decreases
- efficiency decreases
- costs of production increases
Sol: Increase salaries
But -> Increase costs
- output decreases
- efficiency decreases
- costs of production increases
Sol: Increase salaries
But -> Increase costs
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Disadvantages of division of labour
(business)
(business)
Over reliance and dependence on specialist worker -> delays production
(Ex. typewriters to computers) Lacks flexibility to adapt to change -> less competitveness, less revenue
(Ex. typewriters to computers) Lacks flexibility to adapt to change -> less competitveness, less revenue
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Revenue
Price x Quantity sold
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Added value
Added value is the increase in value that a business creates by undertaking the production process
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How to increase added value?
Increase SP but keep costs same
OR
Decrease costs but keep SP same
OR
Decrease costs but keep SP same
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Ways to add value
-Building a brand
-Delivering excellent service
-Product features and benefits
-Offering convenience
-Delivering excellent service
-Product features and benefits
-Offering convenience
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Profit
Total revenue - total costs
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chain of production
the stages of production that a good or service passes through before it reaches the consumer
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3 sectors of production
primary -> aquring raw materials
secondary -> converting raw materials to finished goods
tertiary -> commercial services - production or disruption
secondary -> converting raw materials to finished goods
tertiary -> commercial services - production or disruption
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How are sectors of economy compared?
% of country's total workers employed in each sector
OR
value of output produced by each sector and proportion this is of the national output.
OR
value of output produced by each sector and proportion this is of the national output.
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De-industrialisation
A decline in the importance of a country's secondary sector of industry
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Why does importance of business sectors decrease?
- sources of primary products are depleted
- developed countries loose importance to newly industrialised countries like BRICS
-people start spending higher proportions of their incomes on services as country's wealth and living standard's increase
- developed countries loose importance to newly industrialised countries like BRICS
-people start spending higher proportions of their incomes on services as country's wealth and living standard's increase
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Private sector
Firms owned and controlled by private individuals and their main aim is profit.
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Public Sector
Firms that are owned and controlled by the government. Their main aim is to provide service to all.
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How can profit be maximised?
Maximise sales revenue
OR
Minimise costs
OR
Minimise costs
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Entrepreneur
An individual who takes the financial risk of setting up and managing a new business.
RISK -> Financial loses
AWARDS -> Profit
RISK -> Financial loses
AWARDS -> Profit
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Business Plan
A document containing the business objectives and important details about owners, finance and operations of a business
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contents of a business plan
executive summary
management details
financial forcasts
marketing
marketing research
production details
human resources
aims/targets/objectives
management details
financial forcasts
marketing
marketing research
production details
human resources
aims/targets/objectives
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Purpose of a business plan
- organises recources
- helps gain potential investors
-helps gain loans from banks
- helps plan and budget
- helps gain potential investors
-helps gain loans from banks
- helps plan and budget
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grant
Free money provided by the government if you can meet certain targets
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How do grants help?
grants -> more businesses -> more employment
-> increase in wages -> more spending in poor econonmy areas
-> increase in wages -> more spending in poor econonmy areas
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Why do governments provide support?
- Increase in employment -> more businesses
- Increase in competition -> businesses compete on price
- Increase in output -> economy benefits
- Increase in competition -> businesses compete on price
- Increase in output -> economy benefits
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How do governements support businesses?
- offer grants
- low interest loans
- training/mentoring
-advice and support
- low interest loans
- training/mentoring
-advice and support
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negatives of supporting businesses?
- opportunity costs
- other government priorities
- customer choices
- other government priorities
- customer choices
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People interested in business size?
- shareholders/investors
- governments
- competitors
- workers
- banks
- governments
- competitors
- workers
- banks
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Ways to measure business size?
- Number of employees
- Number of stores
- Value of capital employed
- Value of output
- Value of revenue
- Number of stores
- Value of capital employed
- Value of output
- Value of revenue
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Reasons for business growth
-profit
-reduce costs -> economies of scale
-market share
-ambitious owner
-reduce costs -> economies of scale
-market share
-ambitious owner
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Ways of expansion
Internal expansion -> new products + more stores
External expansion -> merger + takeovers
External expansion -> merger + takeovers
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merger
buying of firms that are in the same industry and the same stage of production.
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Other cards in this set
Card 2
Front
Wants are non-essential goods or services that people would like to have. Eg- mansion, coke
Back
Wants
Card 3
Front
Human wants - > unlimited
Resources - > scare
So, businesses have to make choice
Resources - > scare
So, businesses have to make choice
Back
Card 4
Front
There are not enough goods or services to meet the unlimited wants of the people.
Back
Card 5
Front
- Land
- Labour
- Capital -> equipment and machinery
-Enterprise -> people who set up the factors of production
- Labour
- Capital -> equipment and machinery
-Enterprise -> people who set up the factors of production
Back
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