Lesson 1

IGCSE
Business Studies
Chapter 1
The Purpose of Business
Activity
www.igcsebusiness.co.uk
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Identifying Goods and Services
Think of this situation
You are at a supermarket. What do you see?
Make a list of what you see.

Identifying Goods and Services
Meat
Poultry
Dairy Products
Confectionary
Bread
Pasta, Rice
Cashier
Helper putting
items in bags
Valet
Customer
Service
Security
Goods are
tangible
products
Services are
intangible
products
Confectionary Valet
Customer

What is a need?
A good or service essential for living.
Can you think of an example?
Food Clean Water Clothing Shelter

What is a want?
A good of service which people would like
to have, but is not essential for living.
Salmon Fillet iPhone
Burberry bag Luxury home

EVERYTHING that you want?
Yes
No
Then you must be very
lucky and very rich!

The Real Cause of the
Economic Problem
The real cause of the shortage of goods
and services in a country is the too few
Factors of Production.
Factors of Production are those resources
needed to produce the goods and
services.
1. Land
2. Labour
3. Capital
4. Enterprise
Factors of Production

1. Why are there so many wants and needs
that we cannot satisfy?
2. Why are there millions of people living in
poverty in many places?
very important questions:

All natural resources provided by nature.
Land
Fields and Forests Oil and Gas
Metals
Minerals

This is the efforts of people needed to
make products.
Labour

This is the finance, machinery and
equipment needed for the manufacture
of goods.
Capital

This is the skill and risk-taking ability of the
person who brings the other resources or
factors of production together to
produce a good or service.
Enterprise
These people are called entrepreneurs.

Steve Jobs
Co-founder of Apple Inc.
Entrepreneurs
Steve Jobs

Prince Al Walid Bin Talal
Owner of Kingdom
Holdings Company
Entrepreneurs
Prince Al Walid Bin Talal

The Factors of Production
Factors of
production
Land
Capital
Enterprise
Labor
Fields, oil,
minerals
Finance,
machinery
Entrepreneurs
The people

1. Why are there so many wants and needs
2. Why are there millions of people living in
poverty in many places?
Back to our two important questions

The Factors of Production
These resources are
creating scarcity.
+ =
Unlimited wants Limited resources Scarcity

Limited resources: the need to
choose
We make choices every day.
We have to decide which wants will be
opportunity cost.

Limited resources: the need to
choose
An opportunity cost is the next best
alternative given up by choosing another
item.
Trip or Car. If we choose the car then the
trip is the opportunity cost.
alternative given up by choosing another

Land
Labour
Capital
Enterprise
Revision Summary: The Economic
Problem

Activity: Paper Decoration
How many yellow papers can you cut, glue
and number on the purple sheet?
1. Cut the yellow pieces into 4 even pieces
2. Fold them in half
3. Glue them on the purple paper
4. Number them
Time Allocated: 5 minutes
Cut the yellow pieces into 4 even pieces

Making the best use of limited
resources: Specialisation
Since our resources are limited, we need to utilize
them in the most efficient ways possible.
Machinery is now more widely used and specialised
to perform only one task.
Larger firms are now more common than they used
to be and these often employ workers skilled in a
particular task.
Machinery is now more widely used and specialised
to perform only one task.

Case Study, page 2: The Chain of Production
1
Wood arrives to the factory
2
The wood for 20 tables is cut by a
specialist machine
3
Carpenters assemble the tables
4
The tables are finished in the polishing
department
5
A transport business collects the tables
to deliver them to furniture retailers
Carpenters assemble the tables

Specialisation: Advantages
and Disadvantages
Advantages
Workers are trained in
one task and specialise
in this- this increases
efficiency and output
Less time is wasted to
moving from one work
area to another
Increasing job
opportunities for other
specialised firms in the
chain of production
one task and specialise
in this- this increases

Specialisation: Advantages
and Disadvantages
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
Firms in the chain of
production might prove
to be unreliable.
efficiency might fall

Homework Activity 1.2: Specialisation
Using another product of your choice,
explain, with simple illustrations, how division
of labour or specialisation could be used to
make the product.
What are the advantages and disadvantages
of your chosen business?
Group or single-handed.
Posters or loose-leaf A4 Paper.
make the product.

Limited
resources
Economic
Problem
Unlimited
wants
Scarcity
Choice is
necessary
Oppor-
tunity
Cost
Land
Labour
Capital
Enterprise
Unlimited
wants
Why is business activity needed?
Specialisation
improves
efficiency of
resource use
Businesses combine factors of production to make
products (goods and services) which satisfy
Economic
Problem
Unlimited
wants
Scarcity

Lesson 1

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Lesson 1