This document discusses factors of production and opportunity cost. It defines factors of production as the resources that businesses use, including capital (equipment), enterprise (business skills), land, and labor (human resources). It then defines opportunity cost as the sacrifice incurred in choosing one alternative over another. When starting a business, entrepreneurs often sacrifice a regular wage and use their savings, accepting less secure income and sacrificing interest from savings. The document provides examples to illustrate these concepts.

1. Starter Task
• Write down:
• 2 Examples of a good
• 2 Examples of a service
• 2 Examples of a want
• 2 Examples of a need

2. 1.2 Factors of Production,
opportunity cost
UNIT 1 Business in the Real World
Friday, 08 July 2022

3. Power of 3
•LAST LESSON
•What skills will an entrepreneur
need to be successful?
•What is the difference between a
want and a need?
•What is the difference between a
good and a service?

4. Factors – land, labour, capital, enterprise
• Factors of production are the resources (or materials) that businesses use to
provide goods or services including:
• capital which means the equipment used to provide goods or services,
e.g. a tractor on a farmer’s field
• enterprise are the skills of the people involved in the business to identify
business opportunities and bring together resources to meet these
opportunities, e.g. the skill to drive a tractor and plant potatoes in straight
rows.
• land such as the physical site the business is located on and other natural
resources a business can use, e.g. mines or farmers’ field of crops
• labour which means the skills and number of staff employed by a
business

5. Opportunity cost
What do we mean by the term
Opportunity Cost?

6. Opportunity cost
• Opportunity cost is the sacrifice we make whenever we decide
to do something, e.g. spending bus fare on sweets means
sacrificing a quick journey home, it’s a walk instead.
• When an entrepreneur starts a business they often must
sacrifice the regular wage from an employed job to the less
secure income of a new business.
• Entrepreneurs often use their savings to invest in a business – so
what do they sacrifice?
• Interest is the money paid by banks as a reward to attract
people to save with them.

7. Subtitle: P4 Fatface

8. Writing Frame
BLT:
• Because
• Leading to
• Therefore

9. Why people might set up a business:
Point: To make money:
1. Because: They want to be able to continue skiing in the French
alps.
2. This leads to: The British guys having enough money to be able
to continue skiing through their business selling tees and sweats.
3. Therefore: They will want to set up their business and earn
enough profit for them to live in the French alps and continue their
passion for skiing.
Possible Answers: 1

10. Why people might set up a business:
Point: To exploit a gap in the market:
1. Because: The French alps have a high number of tourists and so
there is an opportunity to sell souvenirs to these people. We can
assume that no other businesses are selling tees and sweats here
so this is a good opportunity for profit.
2. This leads to: More customers since the high number of tourists
provides a large number of customers compared to setting up a
skiing business in the North Pole.
3. Therefore: The businesses was likely to make a profit because
they exploited a gap in the market.
Possible Answers: 2

11. • Is it easier to use the case study?
• YES! When using the case study, we can think about the
specific needs for the question. This will help us answer the
question and also get extra application marks.
• ALWAYS USE THE CASE STUDY!
Note: Application