Business
Activity
Needs, wants, scarcity, specialisation, the purpose of business and how firms add value. The foundation of the entire IGCSE Business Studies course.
Needs, Wants & Scarcity
🍞 Needs
Goods or services essential for survival — food, water, shelter, clothing.
📱 Wants
Goods or services people desire but don’t need to survive. Wants are unlimited.
⚖️ Scarcity
Resources are limited but human wants are unlimited — the basic economic problem.
🔀 Opportunity Cost
The next best alternative given up when a choice is made.
Resources are limited but human wants are unlimited. This forces individuals, businesses and governments to make choices about how to allocate resources.
The next best alternative forgone when making a choice. Example: if a government spends money on hospitals, the opportunity cost is the new roads that were not built.
- Resources (land, labour, capital) are limited → businesses must choose what to produce
- Consumers cannot have everything → they choose what to buy
- Every decision involves a trade-off — choosing one option means giving up another
- Scarcity is WHY businesses exist — they provide solutions to people’s needs and wants
🃏 Click the cards — Need or Want?
Exam Tip: Always link opportunity cost to a specific decision in the question context. Needs are few (survival essentials); wants are unlimited and vary by person.
Specialisation & Division of Labour
Focusing on producing a particular good, service, or task. It occurs at the level of individuals, businesses, regions, and countries.
When production is split into separate tasks each performed by a different worker, this is called Division of Labour. For example: in a car factory, one worker fits engines, another fits doors — everyone becomes expert at their task.
- Increased productivity
- Lower unit costs
- Workers become expert at their task
- Faster production
- Workers may become bored (repetitive tasks)
- Risk of unemployment if skills become obsolete
- Over-dependence on one task or product
Purpose of Business Activity
The fundamental purpose of business is to combine resources (inputs) to produce goods and services (outputs) that satisfy needs and wants.
🌍 Land
👷 Labour
🏭 Capital
💡 Enterprise
⚙️ Production &
Transformation
📦 Goods (physical)
🛎️ Services (intangible)
- To satisfy consumer needs and wants through goods and services
- To make a profit for the owners
- To provide employment
- To create wealth and contribute to the economy
- To provide goods/services that may not otherwise be available
Adding Value
The difference between the selling price of a product and the cost of bought-in inputs.
Baker example: ingredients cost $2, cake sells for $8 → Added Value = $6 ✓
| Method | Real-World Example |
|---|---|
| 🏷️ Branding | Apple charges premium prices — customers believe the brand is worth more. |
| ⭐ Improving Quality | Better materials or craftsmanship allow a higher selling price. |
| 🎨 Unique Design | A stylish design justifies charging more than competitors. |
| 😊 Customer Service | Customers pay more for a better shopping experience. |
| 💰 Reducing Inputs | Negotiating lower supplier prices increases added value without changing selling price. |
| 🕐 Convenience | A 24-hour store can charge more than a supermarket for the same product. |
Exam Tip: Added value is NOT the same as profit — wages and overheads are deducted after. Adding value means raising the selling price OR cutting input costs. Always give a business example in your answer.
Quick Revision Summary
Needs = essential for survival. Wants = desirable but not essential.
Resources limited; wants unlimited → the basic economic problem.
The next best alternative given up when a choice is made.
Focusing on one task/product → increases efficiency & productivity.
Inputs → outputs → satisfy needs & wants → make profit.
Selling Price − Cost of Inputs. Increased by branding, quality, or cutting costs.
Avtar owns a small car repair business in the private sector. He has 2 full-time employees. Currently, customers often complain about long waiting times and the workshop looks untidy.
- Knowledge (K): Added value can be increased by improving customer service (1 mark)
- Application (App): For Avtar, this means tidying the workshop and reducing waiting times (1 mark)
- Analysis (An): Customers would be willing to pay a higher price, increasing added value even if input costs stay the same (1 mark)
Brendan runs a small bakery. He bakes all products himself and sells them directly to customers. Ingredients cost $2 per loaf and he currently sells each loaf for $5.
- Knowledge (K): Brendan could increase added value by improving the quality of his bread (1 mark)
- Application (App): He could do this by using premium ingredients and unique recipes (1 mark)
- Analysis (An): This would allow him to charge a higher selling price, increasing the gap between selling price and input costs (1 mark)
Topic Complete!
Related Resources
Continue Revising
We’re proud to provide valuable educational resources at no cost to you. By allowing ads on our site, you help us keep this platform free and accessible for everyone.
Thank you for your support—it truly makes a difference!