Grade 10, Unit 1, The Purpose of Business Activity

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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.
  Peoples wants are unlimited.

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Needs and Wants (continued)

Needs
Clothing
Food
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
Limited Resources
Scarcity
Plus
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
  builders 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

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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 worlds 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 Shells product?
• Q3. What is Shells product made?