Business activity
| English | Chinese | Pinyin |
|---|---|---|
| wants | 欲望 | yù wàng |
| resources | 资源 | zī yuán |
| goods | 商品 | shāng pǐn |
| services | 服务 | fú wù |
| scarcity | 稀缺 | xī quē |
| opportunity cost | 机会成本 | jī huì chéng běn |
| value added | 附加值 | fù jiā zhí |
Why businesses exist
- People have endless wants 欲望 but the world has limited resources 资源. We can't have everything.
- Businesses exist to turn scarce resources into the goods 商品 and services 服务 people want — adding value along the way.
The economic problem of scarcity arises because:
Scarcity means limited resources cannot meet unlimited wants.
Opportunity cost is:
It is the single next-best alternative sacrificed.
Scarcity 稀缺 and opportunity cost 机会成本
- Scarcity: wants are unlimited but resources are limited, so we must choose.
- Opportunity cost is the next best alternative given up when you choose.
Shops competing on a high street: businesses make goods and services to meet wants
Value added lab
Change the bought-in cost, the selling price and other costs to see how business activity creates value added.
A business buys materials for 18 and sells the finished product for 50. What is the value added?
Value added = 50 − 18 = 32.
Adding value means the selling price is higher than the cost of bought-in materials.
Value added is that difference.
Selling price minus the cost of bought-in materials is value ______.
Value added helps cover other costs and profit.
Adding value
- Value added 附加值 = the selling price minus the cost of the bought-in materials.
- Adding value lets a business charge more than its inputs cost — covering wages, rent and profit.
A business takes inputs and turns them into something worth more — the value added.
What businesses provide
- Goods (physical products) and services (things done for you).
- They also create jobs and incomes and meet customers' needs.
Adding value isn't the same as making profit. Value added must still cover wages, rent and other costs. Only what's left after all costs is profit.
Business activity runs from the primary to the tertiary sector
You've got it
- scarcity forces choice; every choice has an opportunity cost
- value added = selling price − cost of bought-in materials
- businesses provide goods and services, jobs and incomes