The Purpose of business activity Economic Problem
We have unlimited Needs and wants and there are limited resources. This is the basic Economic Problem.
Limited Resources
Resources available on earth to make goods and services to satisfy our needs and want are limited. These resources are also known as factor of production. These can be categorised as
Land: All natural resources provided by nature such as fields, forests, oil, gas, metals and other mineral resources
Labour: The people who are used produce goods and services.
Capital: Finance, machinery and equipments needed to produce goods and services.
Enterprise: The skill and risk taking ability of the person who brings together all the other factors of production together to produce goods and services. Usually the owner or founder of a business.
Opportunity Cost
Because of Unlimited needs and wants and limited resources we have make a choice. When we make a choice we have to give up something. This next best alternative foregone while making a choice is known as Opportunity Cost.
What does business do?
Business activity combines the factors of production to produce goods and services to satisfy our needs and wants.
So a business activity takes in output, processes it and gives an output (diagram)
