1.1: Business Activity Notes:

Businesses provide us (the customers) with goods and services that meet our needs and wants.

GOODS AND SERVICES:

Goods are considered products that a person can PHYSICALLY TOUCH such as cars, water, food, etc. On the other hand, a service is something intangible (you cannot touch) yet still maintains its value such as car insurance, knowledge, etc.

NEEDS VS WANTS:

A "need" is something you cannot live without such as food, water, a home, etc. We say that they are necessities and needed for survival. We can also say that they are limited i.e. they are not endless. A want, however, is a desire and a wish such as a watch, makeup, the newest iPhone, etc. They are said to be unlimited.

*Humans always introduce and invent which increases our wants. However, the earth has limited resources hence causing economic problems such as shortage of goods and services.

FACTORS OF PRODUCTION:

LAND:

• All raw materials and natural resources

• Physical land/extractable resources like coal, oil, and gas

CAPITAL:

• Money and investment

• Man-made tools that help the production such as equipment and machinery

LABOR:

• People who work in the business (workers) and contribute to the production of goods/services 

ENTERPRISE:

• Bringing together the factors needed of production to make a good/service

• Includes entrepreneurs: people who take risks in order to make profit (will be discusses thoroughly later in the course)

SCARCITY:

• Not enough goods and services to meet the wants/needs of the population. For example, 2000 people want to purchase the new iPhone but Apple does not have the materials to manufacture 2000 iPhones.

• We say it s the gap between limited resources and limitless wants

----> Scarcity= Unlimited wants + Limited resources

OPPORTUNITY COST:

• It is the next best alternative forgone when a choice/decision is made. For example, you choose to study at home instead of going to a party. Your opportunity cost (what costed you) is going to a party.

SPECIALIZATION:

• Comes from the word "special" and it means being good or understanding of a specific area. For example, a math teacher, an architectural engineer, a psychotherapist, etc.

• Advantages:                                                                                                        

1. Increases efficiency                                             

2. Production is faster because time and energy is saved                                           

3. Quicker to train workers                                                                                 

4. Skill development 

• Disadvantages:

1. Can get monotonous (boring) since workers perform the same tasks over and over again

2. High labor turnover since low job satisfaction so more people will leave

3. Over-dependency as the business is relying on one person to perform a task. So, if for any reason that person did not show up, the production may stop

WHY IS SPECIALIZATION COMMON?

1. Specialized machinery is available

2. Higher competition means that businesses have to keep their costs low 

3. People think that being specialized causes higher living standards

DIVISION OF LABOR:

• Dividing a job into many specialized parts where everyone is responsible to perform small tasks

• Leads to efficiency 

• Advantages:                                                                                                       

1. Saves time                                                                                                   

2. Each employee is given tasks that suit their skill                                              

3. Increases productivity    

• Disadvantages:

1. Fall in motivation due to boredom

2. If an employee is absent, the production may stop (over-dependency)

ADDING VALUE:

• It is the difference between the selling price and the cost of materials bought

----> Value added= Selling price - Cost of materials bought

• Adding value is not the same as profit

• For example, a car has a selling price of $100,000. $30,000 were used in materials such as metal, tires, and mirrors. So, $100,000 - $30,000= $70,000 added. But what do we use the value added for?

• The value added is used to pay wages of workers, rent, water, electricity, etc. It is NOT profit.

HOW TO INCREASE ADDED VALUE?

1. After-buy service

2. Personalize the product/service

3. Add an extra feature

4. Branding and quality

REMARKS:

• Scarcity ----> Choice ----> Opportunity cost

• A business is any organization that uses all factors of production (resources) to create goods/services to satisfy needs/wants of consumers.

NOTES DONE BY FARIDA SABET

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