Chapter 1 – Business Activity
Need: a product or service essential for survival
Wants: Goods or services for leisure, not essential for survival .
Factors of production:
1.Land
2.Labour
3.Capital
4.Enterprise The economic problem occurs when there are limited factors of production and limited resources, but unlimited wants. Therefore, not
everybody’s wants can be fulfilled.
Opportunity cost: The next best alternative given up by choosing another item that is of greater personal value.
Specialisation: When people. Or businesses, concentrate on doing what they are best at.
Division of labour is a type of specialisation; it consists of delegating tasks to different workers based of their abilities in order to increase efficiency.
Advantages: Time efficient
Workers are good at performing specific tasks, so output is of better quality.
Disadvantages:
No flexibility since workers can only do one task
An absent worker cannot be easily replaced
Boredom from doing the same job may lower efficiencyBusiness: Combining the 4 factors of production to produce a product or service that fulfils people’s needs and wants.
Added Value: The difference between the selling price of a product and its cost of production. Wages, salaries, taxes, profit, etc are obtained from
the added value.
To increase added value, either:
a)Increase selling price b)Decrease cost of production
c)Both
Chapter 2: The Classification of Businesses
Primary sector: this sector extracts and uses natural resources from the earth to produce raw materials. E.g.- farming, mining, forestry, etc
Secondary sector: converts raw materials into manufactured or processed goods. E.g.- construction, baking, car manufacturing, etc
Tertiary sector: providing services to customers and other sectors of the industry. E.g.- banking
The relative importance of a sector in a country depends on:
*No. of workers employed
*Value of output and sales
Industrialization: transitioning from the primary sector to the secondary sector (setting up industries)
De-Industrialization: transitioning from the secondary sector to the tertiary sector. (moving away from industries)
Sector importance may change due to: *Depletion of natural resources
*Extreme competition
*Advancement in standard of living (higher demands)IGCSE Business Studies Notes (0450) Public sector: Government or state-owned businesses where the government has full decision-
making authority and control Usually non-profit but may charge for some of its services.
Private Sector: Businesses owned and controlled by individuals Privatisation: transferring a business or industry from public to private sector the
government may do this to raise money for other projects Nationalization: transferring a business or industry
from private to public sector The governments may do this to protect employment or gain control over industries providing necessities. Private sector businesses are generally considered to be more efficient since their main objective is profit. Chapter 3: Enterprise, Business growth and size
Entrepreneur: a person who organizes, operates and takes risks for a new business venture.
Advantages of being an entrepreneur: *Use personal interests and skills
*Independence in time and money
*Fame and success
*Potentially, high profit and income.
Disadvantages of being an entrepreneur: *Large sums of capital needed
*Lack of prerequisite knowledge
*Lost income from not working a normal job
*Its risky man
Characteristics of successful entrepreneurs: *Creative
*Innovative
*Independent *HardworkingWhy governments support business start-ups:
*They benefit society e.g.- disabled groups
*Can grow and contribute to the economy *Increase competition *Increase output
*Reduce unemployment *Offer variety to population
How governments support business start-ups:
*Advice and support sessions
*Loans at low interest rates
*Grants; to help train employees
*Enterprise zones
*Make research facilities available
Business Plan: A document containing the business
objectives and important details about its operations, finance, ownership, etc
How to measure the size of a business: 1.Number of employees
Easy to calculate and compare BUT not useful for automated industries where machines are employed instead of people.
Additionally, part time workers cannot be measured. 2.Value of output
Easy to measure and reasonable for firms that sell similar products. BUT, the value of output and the value of sales are different. What if the output is high but nobody wants to buy it?
3.Value of sales
Common method, but only for businesses selling similar products, you cannot use this method to compare apple with a chicken nugget company, they sell completely different things.
4.Value of capital employed
The total amount of capital invested into the business. Labour intensive businesses,
however, produce output with very little capital. *Optimistic
*Self-confident
*Risk takers
Need: a product or service essential for survival
Wants: Goods or services for leisure, not essential for survival .
Factors of production:
1.Land
2.Labour
3.Capital
4.Enterprise The economic problem occurs when there are limited factors of production and limited resources, but unlimited wants. Therefore, not
everybody’s wants can be fulfilled.
Opportunity cost: The next best alternative given up by choosing another item that is of greater personal value.
Specialisation: When people. Or businesses, concentrate on doing what they are best at.
Division of labour is a type of specialisation; it consists of delegating tasks to different workers based of their abilities in order to increase efficiency.
Advantages: Time efficient
Workers are good at performing specific tasks, so output is of better quality.
Disadvantages:
No flexibility since workers can only do one task
An absent worker cannot be easily replaced
Boredom from doing the same job may lower efficiencyBusiness: Combining the 4 factors of production to produce a product or service that fulfils people’s needs and wants.
Added Value: The difference between the selling price of a product and its cost of production. Wages, salaries, taxes, profit, etc are obtained from
the added value.
To increase added value, either:
a)Increase selling price b)Decrease cost of production
c)Both
Chapter 2: The Classification of Businesses
Primary sector: this sector extracts and uses natural resources from the earth to produce raw materials. E.g.- farming, mining, forestry, etc
Secondary sector: converts raw materials into manufactured or processed goods. E.g.- construction, baking, car manufacturing, etc
Tertiary sector: providing services to customers and other sectors of the industry. E.g.- banking
The relative importance of a sector in a country depends on:
*No. of workers employed
*Value of output and sales
Industrialization: transitioning from the primary sector to the secondary sector (setting up industries)
De-Industrialization: transitioning from the secondary sector to the tertiary sector. (moving away from industries)
Sector importance may change due to: *Depletion of natural resources
*Extreme competition
*Advancement in standard of living (higher demands)IGCSE Business Studies Notes (0450) Public sector: Government or state-owned businesses where the government has full decision-
making authority and control Usually non-profit but may charge for some of its services.
Private Sector: Businesses owned and controlled by individuals Privatisation: transferring a business or industry from public to private sector the
government may do this to raise money for other projects Nationalization: transferring a business or industry
from private to public sector The governments may do this to protect employment or gain control over industries providing necessities. Private sector businesses are generally considered to be more efficient since their main objective is profit. Chapter 3: Enterprise, Business growth and size
Entrepreneur: a person who organizes, operates and takes risks for a new business venture.
Advantages of being an entrepreneur: *Use personal interests and skills
*Independence in time and money
*Fame and success
*Potentially, high profit and income.
Disadvantages of being an entrepreneur: *Large sums of capital needed
*Lack of prerequisite knowledge
*Lost income from not working a normal job
*Its risky man
Characteristics of successful entrepreneurs: *Creative
*Innovative
*Independent *HardworkingWhy governments support business start-ups:
*They benefit society e.g.- disabled groups
*Can grow and contribute to the economy *Increase competition *Increase output
*Reduce unemployment *Offer variety to population
How governments support business start-ups:
*Advice and support sessions
*Loans at low interest rates
*Grants; to help train employees
*Enterprise zones
*Make research facilities available
Business Plan: A document containing the business
objectives and important details about its operations, finance, ownership, etc
How to measure the size of a business: 1.Number of employees
Easy to calculate and compare BUT not useful for automated industries where machines are employed instead of people.
Additionally, part time workers cannot be measured. 2.Value of output
Easy to measure and reasonable for firms that sell similar products. BUT, the value of output and the value of sales are different. What if the output is high but nobody wants to buy it?
3.Value of sales
Common method, but only for businesses selling similar products, you cannot use this method to compare apple with a chicken nugget company, they sell completely different things.
4.Value of capital employed
The total amount of capital invested into the business. Labour intensive businesses,
however, produce output with very little capital. *Optimistic
*Self-confident
*Risk takers
