ZIMSEC O Level Business Studies: An introduction to Economic Activity and Ordinary Level Business Studies
Business-a commercial activity conducted to satisfy human needs and wants usually done for profit. Business studies is the study of such activities. Examples of Businesses include buying and selling, the offering of services and mining. The word business does not refer to a building although it is often misused this way.
Needs– these are things that human beings require in order to survive e.g. water, shelter, clothes and food. Needs are finite (they can be counted.) Humans cannot survive if their needs are not met. Needs are necessary in order to live.
Wants– these are things that are required by humans to make life more comfortable e.g. sofas, Television, cellphone etc. Wants are infinite (uncountable) that is they are unlimited. Humans can survive even if their wants are not met. Wants are luxuries humans desire to live comfortable lives.
Factors of Production (Resources)
Factors of production are those things that are used as inputs in the production process. They are also generally known as resources. Finished products are given out as output. There are four factors of production (CELL):
• Capital– all the manmade resources that are used in the production process e.g. tractors, bridges, money etc. These are used as aids to production i.e. they help in the production of goods for example machines that produce other goods. The reward for capital is interest.
• Enterprise-People/Individuals that are prepared to take the risk and have the skill of starting a business. Entrepreneurs combine the other three factors of production with the intent of making profit. The reward for enterprise is profit.
• Land– these are all the natural resources that are used in the production process e.g. freehold land. Land also includes those things that are above and below the soil provided that they are natural for example copper ore and air are part of land. The reward for land is rent.
• Labour– the number of people that are able to work. Labour refers to the human effort and expertise (skill) that is used in the production process. The reward for labour are wages and salaries.
Scarcity-the factors of production (resources) are finite and therefore limited.
Choice-because resources are scarce people need to decide which needs and wants they have to satisfy. Choice is the process of deciding between alternatives.
Opportunity Cost-is the cost of foregoing the next best alternative. For example Tapiwa has $30 which she can use to either go to the movies or to buy food. If she decides to go to the movies it means she can no longer buy food therefore she goes hungry. In this case food is an opportunity cost because she does not get to enjoy eating the food.
When a choice is made the thing that you do not choose is called opportunity cost.
To access more topics go to the Business Studies Notes page.