IGCSE BUSINESS STUDIES Topic : Economic Problem and Opportunity cost

Economic Problem

We have unlimited Needs and wants and there are limited resources. This is the basic Economic Problem.

Limited Resources

Resources available on earth to make goods and services to satisfy our needs and want are limited. These resources are also known as factor of production. These can be categorised as

Land

All natural resources provided by nature such as fields, forests, oil, gas, metals and other mineral resources

Labour

The people who are used produce goods and services.

Capital

Finance, machinery and equipments needed to produce goods and services.

Enterprise

The skill and risk taking ability of the person who brings together all the other factors of production together to produce goods and services. Usually the owner or founder of a business.
Business activity combines the factors of production to produce goods and services to satisfy our needs and wants.So a business activity takes inputs (factors of productions), processes it and gives an output

Opportunity Cost

Because of Unlimited needs and wants and limited resources we have make a choice. When we make a choice we have to give up something. This next best alternative foregone while making a choice is known as Opportunity Cost.