Transcript Grade 10, Unit 1, The Purpose of Business Activity 1

Grade 10, Unit 1,
The Purpose of Business Activity
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 Business produce goods and services.
Goods: Tangible products that can be
touched and consumed.
Services: Things other people or businesses
do for you.
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Scarcity, Choice and the Allocation of Resources
 Supply is limited.
 Resources are limited.
 Resources are scarce,
a choice must be made as to what to
produce.
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Needs and Wants
 Need:
Something necessary to sustain life.
 Want:
Something chosen to satisfy a need or to
make life more enjoyable.
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The Economic Problem: Needs And Wants
 A need:
Is a good or service essential for living.
 A want:
Is a good or service which people would like
to have, but which is not essential for living.
People’s wants are unlimited.
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Needs and Wants (continued)
Needs
Food
Clothing
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Shelter
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Needs and Wants (continued)
 Need:
Food
Wants
Pizza
Hamburger
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The Economic Problem: Needs And Wants
(continued)
 The real cause of the economic problem
Unlimited
Wants
Plus
Limited
Resources
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Scarcity
Equals
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The Economic Problem: Needs And
Wants (continued)
 Limited resources, such as:
- Land,
(fields, forests, oil, gas, metals).
- Labour,
(people).
- Capital,
(finance, machinery, equipment).
- Enterprise.
(The skill).
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Demand and Effective Demand
 When you want something, you create a
demand for it.
 Effective demand:
Demand for a product that is backed up by
an ability and willingness to pay for it.
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Allocating Resources
 Satisfying our wants from scarce resources
involves a choice.
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Cost and Opportunity Cost
 Opportunity cost:
The cost of one item in terms of the next
best alternative that must be foregone.
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Limited Resources: The Need To Choose
 Examples of opportunity cost:
- Individual,
(Holiday or car?)
The individual chooses to buy the holiday,
so the car becomes the opportunity cost.
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Limited Resources: The Need To Choose
(continued)
 Examples of opportunity cost:
- Business,
(Machine A or machine B?)
The company decides to buy machine A,
so machine B becomes the opportunity cost.
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Making The Best Use of Limited
Resources: Specialisation
 Use the resources in the most efficient way
possible.
 Specialisation:
Where resources are used to concentrate on
producing one particular product.
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Exchange in Early Societies
 Exchange:
The ability to exchange one type of goods
or services for another, normally using
money as a means of exchange.
 Specialisation:
The tendency of an individual, business, region or
country to produce certain goods or services.
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The Development of Firms and the
Division of Labor
 Firms and the division of labour growth.
 Firm or business is able to specialise in one
type of good or service.
 The employees can specialise in one type of
activity (such as accountancy, operating
computer).
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The Development of Firms and the
Division of Labor
 Division of labour:
- Each worker does one specialised job.
- When the production process is split up into
different tasks and each worker performs of
one these tasks.
Ex: In a computer assembly factory, each
worker will perform a specialist task.
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The Development of Firms and the
Division of Labor
 Division of labour:
- Advantages:
** Increase efficiency and output.
- Disadvantages:
** Workers can become bored, efficiency
might fall.
** If one worker is absent and no one else
can do the job, production might be stopped.
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Business Objectives
 Business objectives:
Are the aims or targets that a business works
towards.
 Most common business objectives are:
- To make profit.
- To increase added value.
- To expand the business.
- To achieve business survival.
- To provide a service to the community.
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Business Objectives
 Value added:
The difference between the selling price of a product or
service
and the cost of bought in materials and components.
Value added is not the same as profit.
Example:
The selling price of a newly built house is $ 100000. The
value
of the bought in bricks, cement, wood, and other materials
was $ 15000. The value added by the builder is $ 85000,
but this is not the builder’s profit as so many other costs
and expensed have to be taken into account too.
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International and Regional
Specialisation
 Geographical, geological and climate factors make
some areas of the world more suitable than others for
the production of certain goods.
 Countries also differ in the amount of machinery and
other technology,
or the availability and cost of labour.
Any surplus is exported (sold to),
Any deficit is imported (bought).
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Business Stakeholders And Their Aims
 A stakeholder:
is any person or group with a direct interest in the
performance and activities of a business, such as:
- owners,
- managers,
- workers,
- consumers,
- government,
- community.
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Business Stakeholders And Their Aims
Owners
- Will take a share of the profits.
- Risk takers.
Workers
- Employees.
- Need a regular payment.
Managers
- Employees.
- High salaries.
Customers
- Buy the goods and services.
- Reliable products and services.
Government
- Responsible for the economy of the
country.
- Pass the laws.
The whole community
- Raise the living standards.
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Summary
 Goods and services are produced using
scarce resources.
 Businesses supply goods and services to
meet the needs and wants of consumers.
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Homework
Submit on Thursday July 31, 2008

Define what is meant by scarcity when referring to the economic
problem.

Explain what is meant by “division of labour.”

From the following list, decide which items are human needs
and which are wants:
- luxury house,
- shelter,
- Coca cola,
- Car,
- Clean water,
- Designer jeans,
- Clothing.
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Business in Context
 Shell is one of the world’s largest oil companies. The
company makes products such as petrol and diesel from
crude oil. Crude oil is unrefined oil that is found occurring
naturally in deposits within the earth. To produce the petrol
that people but from garages Shell must first extract the
crude oil from the earth. The company does this by drilling
oil wells, many of which are under the sea.
Q1. What does Shell produce?
Q2. Where can you buy Shell’s product?
Q3. What is Shell’s product made?
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