The economic problem of unlimited wants and limited resources

The factors of production The development of economic activity

and the use of specialization What is meant by a business The most common aims of business The different groups involved in

business activity.

Needs Wants

Needs› Essential goods or

services necessary for living.

› Satisfy the basic things for life.

Wants › Non-essential

goods and services that people would like to have.

› Interests & Tastes

Needs Wants

Limit your wants to no more than 25 items please!

The shortage of goods & services

› TOO FEW FACTORS OF PRODUCTION!

Land Labour

Capital Enterprise

Factors of Production

All of the natural resources provided by nature

All people’s efforts to make products

All finance, machinery & equipment in manufacturing products

All people that have skills & have risk-taking ability factors of production produce good or service

Limited in Supply

Land Labour

Capital Enterprise

Factors of Production

Unlimited Wants

Limited Resources

Scarcity+ =

Individual Business Government

Joe cuts the wood

He assembles the table

Joe polishes the table

Joe delivers the table on a horse and cart

1 432

The wood for 20 tables is cut with a specialist machine

Carpenters assemble the tables

The tables are finished in the polishing department

A transport company collects the tables to deliver them to furniture retailers

1

43

2

Specialization / Division of Labour

› Production Process

› Different tasks split up

› Workers performs a task

Advantages› Specialised task training› Increases efficiency› Increases output› Save time

Disadvantages› Bored workers› Possible drops in efficiency› Production stopped due to

absence

Unlimited wants 4 factors of production

› Resources in limited supply to make goods and services

Scarcity› Limited resources – unlimited wants

Choice› Opportunity Cost

Specialisation› Improves efficient use of resources

Combine factors of production Produce products satisfy peoples wants

Goods› Physical items› Tangible› Touch and see

Services› Intangible

Combines scarce factors of production in order to produce good and services

Produces those goods and services which are needed to satisfy the needs and wants of the population

Employs people as worker and pays them wages to allow them to consume products made by other people

Aim / Target to work towards› Make a Profit› To increase added value› To expand the business› To achieve business survival› To provide a service

Selling Price

Cost of materials/

Components

Value Added

- =

Get into groups and look at the text and prepare to explain to the rest of the class what your objective means.› Group 1 – Profit and Growth› Group 2 – Added Value› Group 3 – Survival and providing a service

Prepare to give a presentation on your findings

Owners Workers Managers Consumers Government Community

The difference between wants and needs, with examples

Scarce resources Principle of opportunity costs Importance of specialization in

production Purpose of business activity Importance of different groups in

business activities.

IGSCE Business Studies › The purpose of Business Activity› Revision Questions