Revision:Business Environment

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Activity in our economy

1.1 Activity in our Economy

Economic Activity- Introduction

1. Economic Activity takes place within a country such as the United Kingdom. It sets out to satisfy the needs of the society.
2. The economy produces goods and services for the people who want it- its consumers.
3. However to produce goods and service you need resources. These resources are called "factors of production".
4. There are four main "factors of production":
   1. Capital: Used to invest in the business. Capital can be used to invest in the machines, equipment and companies that all contribute to producing resources.
   2. Enterprise: Refers to the people who are willing to take the risk of setting up in business and of making business decisions.
   3. Land: Used for agriculture, houses, leisure activities and so on, as well as for providing natural resources.
   4. Labour: The number of men and women who are available to work.

Economic activity- Scarcity and choice

1. The main problem faced by most societies is that the economy can't satisfy all the need of its members.
2. The wants are unlimited however the resources are limited.
3. In many cases the price mechanism determines what is produced or the government may take an important role in deciding what, how, where products or services will be produced.
4. Governments often use regional policy to influence where new firms are established, for example by awarding grants to encourage entrepreneurs to set up production in certain regions of the country.

Economic Activity- Opportunity Cost

1. Unfortunately, we have limited resources and unlimited wants, some of our wants have to be unsatisfied. We must choose how we spend our money or our time.
2. The opportunity cost is the cost of having to go without one thing to get another.
3. For example, for an entrepreneur, the opportunity cost of buying a new machine may be having to postpone the manufacture of a new model in the product range.

Specialisation- Introduction

1. Production tends to be indirect instead of direct. This means that people do not produce things for themselves, but instead work with others to make goods and services that are then sold to the general public.
2. Firms also specialise in a division of labour. This is employees specialising in different jobs.

Specialisation- Specialisation of people- Advantages and Disadvantages

Advantages

1. Unit costs are reduced, because manufacturing processes can take place more easily.
2. Specialist equipment can be used, leading to more efficient production.
3. Employees become specialised, and therefore quicker and more efficient.

Disadvantages

1. There is a risk of boredom for some employees, leading to lower job satisfaction and possibly labour disputes or lower quality production.
2. A single group of workers taking industrial action can halt the production line.
3. Unemployed workers may possess narrow, specialist but out of date skills.

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