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Business Studies - Grade 9 igcse Cheat Sheet (DRAFT) by

Chapter 1.1 - Business Activity This chapter will explain: - the concept of needs, wants, scarcity, and opportunity cost - the importance of specialisation - the purpose of business activity - the concept of added value and how added value can be increased

This is a draft cheat sheet. It is a work in progress and is not finished yet.

Needs, Wants, and Oppurt­unity Cost

Need
A need is a good or service essential for living.
Want
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.
Economic Problem
There are unlimited wants but limited resources to produce the goods and services to satisy those wants. This creates scarcity.
 
Unlimited wants + Limited resources = Scarcity
Scarcity
The lack of sufficient products to fulfill the total wants of the popula­tion.

Oppurt­unity Cost

Opport­unity cost is the next best altern­ative given up by choosing another item.

Specia­lis­ation

Occurs when people concen­trate on what they are best at.

Specia­lis­ation

Specia­lis­ation is now very common because:
- Specia­lised machinery and techno­logies are now widely available.
- Increasing compet­ition means that business have to keep costs low
- Most people recognise that higher living standards can result from being specia­lised

Division of Labor

Is when the production process is split into different tasks and each worker performs one of these tasks. It is a form of specia­lis­ation.

Division of Labor

Advant­ages:
Disadv­ant­ages:
- Increase in efficiency and output
- Bored workers
- Saves time
- Drop in efficiency
- Specia­lises training
- Production may stop due to absences of one worker

Business

Combine factors of production to make products (goods and services) which satisfy people's wants.

Classi­fic­ation of products

Goods
Services
- physical items which we can touch and see
- Intangible
- tangible
 

Factors Of Production

Factors of production
Factors of production are those resources needed to produce goods or services. There are four factors of production and they are in limited supply.
Land
Used to cover all of the natural resources provided by nature.
Labour
This is the number of people available to make products.
Capital
This is the finance, machinery and equipment needed for the manufa­cture of goods.
Enterprise
This is the skill and risk-t­aking ability of the person who brings the other resources or factors of production together to produce a good or service.

Added Value

This is the difference between selling price of a product and the cost of bought-in materials and compon­ents.

Selling Price - Cost of materials = Value added

Added Value

WARNING
Do not confuse added value with profit as they are not the same.

Aims of business activity

Combines scarce factors of production to produce goods and services
Produce goods and services which are needed to satisfy the needs and wants of the population
Employs people as workers and pay them wages to allow them to consume products made by other people

Why is added value important?

- Can pay other costs such as labor costs, management expenses and costs including advert­ising and power.
- May be able to make a profit if these other costs come to a total that is less than the added value.

How could a business increase added value?

Building a brand:
A reputation for quality, value, etc. that customers are prepared to pay for.
Delivering Excellent Service:
High quality, attentive personal service can make the difference between achieving a high price or a medium one
Product Features and Benefits:
Additional functi­onality of different versions of software can enable a software seller to charge higher prices.
Offering Conven­ience:
Customers will often pay a little more for a product that they can have a shortcut, or which saves them time.