SECTION 1: UNDERSTANDING BUSINESS ACTIVITY

MADE BY: SULEMAN RIZVI

The econimics problem:
needs and wants
 Basically all humans have needs and wants.
NEEDS are things we can’t live without , while
WANTS are simply our desires that we can live
without. We all have unlimited wants, which is
True, since all of us want a new PC, a car, new
graphics card, etc. that we actually do not need to
live. Businesses produce goods and services to
satisfy needs and wants .

ALTHOUGH WE HAVE UNLIMITED WANTS,

THERE ARE ENOUGH RESOURCES FOR EVERYONE.
Land:All natural resources used to make a
product or service.
Labour:The effort of workers required to make a
product or service.
Capital: finance, machinery and equipment
required to make a product or service.
Enterprise:Skill and risk taking ability of the
entrepreneur.
 DIVISION OF LABOUR/SPECIALIZATION
Because there are limited resources, we need
to use them the most efficient way possible.
Therefore, we now use production methods
that are as fast as possible and as efficient
as possible.
The main production method that we are
using nowadays is known as specialization of
division of labor.
“Division of labor is when the production
process is split up into different tasks and
each specialized worker/machine performs
one of these tasks”.
1.Specialized workers are good at one task and
increases efficiency and output.

2.Less time is wasted switching jobs by the

individual.

3.Machinery also helps all jobs and can be

operated 24/7.
1.Boredom from doing the same job lowers
efficiency.

2.No flexibility because workers can only do

one job and cannot do others well if needed.

3.If one worker is absent and no-one can

replace him, the production process stops.
 This is avery important idea. All businesses
attempt to added value. If value is not added to
the materials and components that a business
buys in then:
 Other costs cannot be paid for
 No profit will be made.
EXAMPLES:
1.The selling price of a newly built house is $100
000.
2.The value of the bought in bricks,cement,wood
and other materials was$15 000.
3.The added of the building firm was $85 000.this
is not profit-out of this the builder must pay
wages and other costs too.
Levels of economic activity
1.Primary sector:The natural resources extraction
sector.E.g. farming, forestry,
mining…..(earns the least money).
2.Secondary sector:The manufacturing sector.E.g.
Construction, car manufacturing, baking…(earns a
medium amount of money)
3.Tertiary sector:The service sector.E.g banks,trans-
Port, insurance…..(earns the most money).
Importance of a sector in a country :
1.no: of workers employed.
2.Value of output and sales.
 Industrialization: a country is moving from
the primary sector to the secondary sector.

 De-industrialization: a country is moving

from the secondary sector to the tertiary
sector. In both cases ,these processes earn
the country more revenue.
 Businesses belong to both the private and
public sector. Government controls part of
the economy.
 Industries under government ownership:
 Health
 Education
 Defence
 Public transport
 Water & electricity