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Unit 1 ± Business Structure,

Objectives and External Influences What is business?

 ±  Business is busy-ness.

 It involves

 ±  Organising resources

 ±  Producing goods and services

 ±  Selling products ±  Managing business activities and customers

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 Needs and Wants

Need:

³Need is a good or service essential for living´

Examples ?

Want:

³Want is a good or service that people want but is not

essential for everyday life and work´Examples ?

Wants are unlimited

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Factors of Production

1. Land

The general term includes the land itself and all therenewable and non-renewable sources of nature.

2. Labour

Manual and skilled labour make up the workforce of the

business.

3. Capital

The finance needed to set up a business and pay for itscontinuing operation. Also the man-made resources used inproduction.

4. Organisation/Enterprise

The driving force provided by risk-taking individuals, thatcombines the other factors of production into producinggoods and services.

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Economic Problem

The economic problem arises when there are unlimited

wants but limited resources.

Unlimited wants lead to the economic problem.

Economic Problem leads to Scarcity.

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Demand and Effective Demand

Demand:

The want  for a product creates its

demand.

Effective Demand:

Demand for a product that is backedup by an ability and willingness to ay

for it.

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Cost and Opportunity Cost

Cost:

 ± The financial cost of a product.

Opportunity Cost

 ± The cost of one item in terms of nextbest alternative that must be foregone.

Example ???

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Market & Types of Prodcuts

Market:A market exists where buyers and sellers communicate inorder to exchange goods and services.

Customers buy the goods and services. Consumers buy and use the goods and services to satisfy their

wants and needs.

Types Of Products:1. Consumer Goods

2. Consumer Services

3. Capital Goods

4. Capital Services

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Specialisation

³The tendency of an individual, business, region or 

country to produce certain goods or services.´ 

Division of labour:

Specialisation of labour in one type of activity e.g. 

accountancy or operating a computer.

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Specialisation (contd.)

Advantages:1. People concentrate on task they do best.

2. Skills are improved through repetitive working.

3. Time is saved.

4. Organisation of production becomes easier and productive.

Disadvantages:1. Work can become tedious and boring.

2. Problems can occur in dependent stages.3. Over-specialisation causes problems when the demand changes.

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Classification of Business Activity

It is often classified as the type of production that takesplace.

1. Primary Sector:Extraction of raw materials from the earth ±mining,quarrying, fishing, agriculture, forestry.

2. Secondary Sector:Processing of raw materials into finished or semi-finishedproducts ±manufacturing.

3. Tertiary Sector:Service industries ± leisure, transport, finance, distribution,retailing, wholesaling, communications.

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Business Activity

Produces and output ± good or service

Goods and services are consumed.

A number of business functions may be carriedout.

Business can be affected by external factor.