The purpose of business activity:

People have unlimited wants + Limited Resources = Scarcity
The cause of shortage or scarcity of goods and services is that there are not enough factors of production.
The four factors of production are: * Land- This is the term used to cover all the natural resources provided by nature e.g. Forests, oil, Gas, metals… * Labour- the No. of people that make the product or produce the service. * Capital- the Finance inputted in a business * Enterprise- the skill and risk-taking ability of a person who uses the factors of production together to produce a good or service. (Owner of a business)

There are limited resources but so many wants. We therefore have to decide which wants we would like. We would inevitably have to give up something by making this choice. This leads to opportunity costs- the next best alternative given up by choosing another item.

Specialisation- occurs when people and businesses concentrate on what they are best at.
It’s common because the technology that specialists use are available and most people are aware that higher living standards can be achieved by being a specialist.
Advantages:
* Workers are trained in one task so they are more efficient * Less time is wasted moving from one workbench to another
Disadvantages:
* Workers can become bored doing the same thing * Is one worker is absent no one else can work
Business:
* Combine scare factors of production to produce goods. * Produces goods and services which satisfy needs and wants of the customer * Employs people

Added Value- is the difference between the selling price of a product and the cost of bought in materials and components.
Eg a house is $100000, the value of bricks..cement..ect… is $15000 aded value of the house was $85000 (not profit)
Adding value enables you to make profit and cover labour costs, management costs...
Reduce material cost and increase price is the best way to add value.