Business Activity Fundamentals: Needs, Wants, and Objectives

Chapter 1: The Purpose of Business Activity

Needs vs. Wants

• Need: A good or service essential for living.
• Want: A good or service people would like to have, but is not essential for living. People’s wants are unlimited.

Unlimited wants + Limited Resources = Scarcity (The Economic Problem)

Factors of Production

Factors of production are the resources needed to produce goods or services. All four types are limited in supply:

• Land: All natural resources.
• Labour: The efforts of the workforce used as input into the business.
• Capital: Finance, machinery, and equipment needed for production.
• Enterprise: The skill and risk-taking ability of the person who brings the other factors of production together (e.g., entrepreneurs).

Key Economic Concepts

• Opportunity Cost: The next best alternative given up by choosing another item.
• Division of Labour (Specialization): When the production process is split into different tasks, and each worker performs only one task.

Businesses combine these factors of production to create products that satisfy human wants.

Business Objectives

Business objectives are the aims or targets that a business works towards. The five most common objectives are:

1. Profit: Sales revenue minus the cost of goods sold.
2. Added Value: The difference between the selling price and the cost of materials.
3. Expansion: Growth of the business.
4. Survival: Achieving long-term business continuity.
5. Community Service: Providing a service to the local community.

Conflicts and Stakeholders

Conflict of Business Objectives: This occurs when different groups hold viewpoints that oppose the business's direction, often because they believe needs are not being met or objectives are not beneficial.

Stakeholder: Any person or group directly interested in the performance and activities of a business (e.g., owners, directors, workers, managers, consumers, government, and the local community).