Business Studies/Economics Guide

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Business Studies Guide

What is a Business

  • A business is an organization where goods and services are exchanged for one another, most commonly through money

  • A Business can be started for the following reasons

Goods and Services

  • 1) Making a profit

  • 2)The satisfaction of business and being independent

  • 3)To be the main occupation of a person/s

  • 4)Making a difference (This is especially for charities and NGOs)

Services

  • A good is a tangible item that a business offers for trade or money

  • A service is an action/s that a business offers to do for a customer in exchange for trade or money

  • A need is something that is required to live or progress in life, while a want is something desirable but does not need to be in possession of.

Factors of production

  • There are multiple factors of production:

  • 1)Land -(a space and/or natural resources are required to set the business and start production at a place)

  • 2)Labour- For production, human effort is required in order to make products/products for services

  • 3)Capital- To start up a business, a person must possess some form of assets (in most cases some form of wealth)

  • 4) Enterprise-  A business is needed to be recognized as the source of production

Opportunity cost

  • Opportunity cost is the options a person chose to forgo in favour of the most preferred option

  • E.g If a person chooses an apple over an orange, then the opportunity cost is the orange as he/she preferred the apple more

Sectors of Production

  • There are three sectors of production:

  • Primary Sector- The Industries/Businesses that are involved in the extraction/collection of natural resources required for production. These can include crops (farmers), Oil (Oil exploration companies), ores (Mining and exploration)

  • Secondary Sector- The Businesses/Industries that modify and convert the natural resources into the final product

  • Tertiary Sector- The Businesses that promote and sell the products for money

What is an Enterprise/Entrepreneur

  • An enterprise is a business or company

  • An entrepreneur is a person who seeks for a venture in order to take advantage of a benefit

  • An Entrepreneur should have the following characteristics

  • Hard-Working

  • Dedicated

  • Innovative and fresh

  • Organised

  • Determined to make the idea work

  • Risk Taking while also cautious

Objectives of an Entrepreneur

  • Have flexible working hours (although at the start, you will need to put a huge amount of time into making the business work)

  • Have total control over the business

  • Earn money out of the idea proposed

  • Identify a gap in the market to exploit

  • Avoid dissatisfaction of those found in the current job, in the business

  • Pursue a personal/financial interest

A Business must be adaptable to the changing business environment

  • Changes in technology means that traditional methods of business (such as traditional production methods) can become obsolete and less effective

  • Economic situation- The business must consider whether the market is performing well, and the competition of rivals in the business. For example, it is not considered economically feasible to pursue technologies such as the telegram that has already become obsolete by

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