These notes got me an A*, a 90% on my final IGCSE exam in May 2022. The notes are mostly in bullet point form that follows the structure of the exam's mark scheme/model answers. My notes also contain summaries of the key concepts taught throughout the course. These summaries are crafted in a concis...
What is business activity?
● Private sector - aim to make profit by selling goods and services that
the consumers need and wants.
Some may not aim for profit:
➔ Helping others - charities to help people or animals or environment
➔ Provide services to members - sports club membership fees are used
to keep the clubs operating with no profit
● Public sector - provide public service free of charge
Factors of production:
1. Land
2. Labor
3. Capital
4. Enterprise
Added Value (labor cost, management expenses, advertising) = Selling price of
the product - material cost
Revenue - Cost - added value = profit
Why is added value important?
1. Can pay other costs such as labour costs, management expenses and
costs including advertising and power
2. 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?
1. Increase selling price but keep the cost of materials the same
2. Reduce the cost of materials but keep the price the same
Specialization - when a person is trained and specialized in a particular
skill/task in that industry
Division of labor:
● dividing different jobs and making each worker a specialist at just one
task
,Advantages:
● Workers are trained in one task and specialise in this – this increases
efficiency and output
● Less time is wasted moving from one workbench to another
● Quicker and cheaper to train workers as fewer skills need to be taught
Disadvantages:
● Workers can become bored doing just one job – efficiency might fall
● If one worker is absent and no one else can do the job, production
might be stopped
Chapter 2
What is the primary sector?
➔ The primary sector means directly taking natural resources from nature
and use it to produce the product.
➔ Usually, underdeveloped countries are in the primary sector, because of
unskilled labor, therefore, countries might not want to invest their money in
them
What is the secondary sector?
➔ The secondary sector is taking the materials from the primary sector and
using capital and labor to produce goods
➔ Usually, developing countries belong to this sector because their country is
developing, labor and machinery are in the process of developing
What is the tertiary sector?
➔ The tertiary sector is the service provided to customers (eg. restaurants,
entertainment industries, health care, transportation, hospitality, travel,
etc.)
➔ Usually, well-developed countries belong to this sector, because they have
skilled labor and the cost of living is expensive, therefore, they provide
services
De-industrialization - when a country/company goes from the secondary sector
to the tertiary sector (developing country)
➔ As the country develops, their cost of living increases, and people usually
spend their income on traveling and restaurants
,What is the private sector?
➔ The private sector means that businesses that are not owned by the
government
➔ These businesses decide at what price level should they sell their
goods/services for
➔ What to produce, How to produce, and For whom to produce
What is the public sector?
➔ Businesses that are owned by the government (eg. MTR, Disneyland,
Health care, education, electricity & water supply, etc.)
➔ The government decides at what price level should they sell their services
at
➔ What to produce, How to produce, and For whom to produce
➔ Some services are free of charge like, health care and education
➔ To protect its citizens by providing the needs of living for its citizens at a
reasonable price
Why is the government not effective?
● The civil servants are permanent jobs that they can do their jobs until
retired
● Civil servants do not have direct linkage to the result -- failure or success
● They do not have the incentive to improve their effectiveness because they
do not get promoted by their performance, they do not get commissions or
bonuses
Privatization - when a business changes from the public sector to the private
sector
➔ To raise employment rates
➔ Private businesses are more efficient at maximizing profits
➔ Competition between private sectors can improve the quality of the product
Chapter 3
Why/how government support business startups?
➔ Reduce unemployment rates
➢ Provide training sessions
What is an entrepreneur?
➔ An entrepreneur is a person that operates their own business, who takes
all the risks him/herself and takes all the profits
, Advantages
➢ Takes all the profits
➢ Can use personal skills and interests and apply them to their business
➢ Can decide how to use time and money on the business
Disadvantages
➢ The entrepreneur has to take all the risks of the company
➢ Has to sell personal assets to pay off debts
➢ Needs to use personal money for capital
➢ The opportunity cost of not being and getting the salary of an employee,
because their income depends on how successful their company is while
employees get a stable monthly salary
Characteristics
➢ Risk-taker
➢ Creative - constantly create new ideas and ideas of how to operate the
businesses in case if the previous method fails
➢ Effective communicator - have the confidence to talk to banks, customers,
government agencies
Advantages
➔ Increase the efficiency of the company
➔ Less time wasted on moving from location/task to another
➔ Quicker, easier and cheaper to train a person in 1 task/skill
Disadvantages
➔ That person is more difficult to change fields
➔ They will get bored and decrease efficiency
➔ If absent, no one can substitute for them, then the operation may be stuck
What is a business plan?
➔ What to produce
➔ How to produce
➔ For whom to produce
➔ Capital
➔ Cash flow
➔ Forecasting profit
How is the business plan for helping businesses?
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