1. The Economic Framework of Business

2. Factors of Production PRODUCT Capital, available for invest- ment in new machines,etc. Land, used for agriculture, housing development and for providing natural resources. Enterprise, referring to the people who are willing to take the risk of setting up in business. Labour, the number of persons available and willing to work.

3. Scarcity and Choice unlimitedlimited WantsResources Choices Conflict

4. Key Questions for Society What to produce ? price mechanism government

5. Key Questions for Society What to produce ? How to produce ? buy machines or hire employees

6. Key Questions for Society What to produce ? How to produce ? Where to produce ? availability of inexpensive building land suitably skilled workforce government‘s regional policy

7. Specialisation and Exchange Lack of coincidence of wants Indivisibility Valuation Problems

8. Functions of Money Medium of exchange Medium of exchange Measure of value Measure of value Store of value Store of value $500.-

9. Specialisation Former times one single person

10. Specialisation Today many persons

11. Specialisation Reduced unit costs Use of specialist equipment Employees become specialised Lower job satisfaction Sensitive against industrial action Problems with unemployed workers AdvantagesDisadvantages

12. Interdependence through Specialisation Firms Countries People

13. Economic Systems Free Market System Mixed Economy Planned System

14. Free Market System X XX X (5 price, 30000 quantity) (1 price, 5000 quantity) (5 price, 5000 quantity) (1 price, 30000 quantity) Demand Supply Price mechanism Resources are owned by individuals

15. Advantages Free Market System Incentive ChoiceCompetition

16. Disadvantages Unequal distribution of wealth Public services Profit motive Hardship Wasted or reduced competition

17. Economic Systems Free Market System Mixed Economy Planned System

18. Advantages Use of resources Large-scale production Public services Basic services

19. Disadvantages Lack of choice Little incentive Centralised control

20. Economic Systems Free Market System Mixed Economy Planned System

21. Mixed Economy AdvantagesDisadvantages Necessaryservices Incentive Competition Largemonopolies Bureaucracy

22. Types of Production

23. PRODUCER Insurance Banking Transport Advertising Warehousing Exportservices Communicationservices

24. Types of Markets Consumer markets single-use consumer goods services consumer durables Industrial markets industrial services capital goods

25. Test Questions The four factors of production are... Explain ‘opportunity cost’ and give one example of its relevance to business. Distinguish between Direct and Indirect production. All firms specialise to some extent. What benefits do they gain from this ? What is the main difference between a free market economic system and a planned system ? Give three advantages found in a) the free market system; b) the planned system. Distinguish between primary, secondary and tertiary forms of production. Classify the following occupations as primary, secondary or tertiary: a) shopkeeperb) delivery van driver c) bricklayer d) car body welder e) foresterf) seaman g) banker h) miner A ‘market’ is a place where … and … are in contact with each other to determine a price.

26. All information taken from: Letts Study Guide GCSE, Floyd,David;Business Studies;Letts Educational; London 1997 ISBN: 1 85758 576 3 Don‘t do that ! Always have a look at the bright side of life !