BUSINESS STUDIES The economic problem NeedsWants Resources

NEEDS GGoods or services essential for living.

WANTS GGoods or services that people would like to have which are not essential for life.

RESOURCES  Factors of production ○ Land- Natural resources ○ Labour- Efforts of people ○ Capital- Finance and equipment ○ Enterprise - skill to bring the resources together to produce a good or service. (Person: entrepreneur)

SCARCITY TThe factors of production are limited in supply. TThere are never enough to produce all the needs and wants of a whole population. TThere is an economic problem.

THE NEED TO CHOOSE AAs there are limited resources for unlimited wants, people have to decide which wants they will satisfy and which they will not.

OPPORTUNITY COST IIt is the next best alternative given up by choosing another item. AB Car A or car B? The individual chooses car B. Therefore, car A is the opportunity cost.

COSTS – REVENUE - PROFIT. CCOSTS- Expenses incurred by a firm in producing and selling its products. They include expenditure on wages and raw materials. RREVENUE- It is the amount of money a firm gets from selling a good or service. PPROFIT- It is the difference between what it costs to produce something and what it is sold for. (Price-Costs).

COSTS  FIXED- Are the same regardless the production.  VARIABLE- Increase with the amount produced.  TOTAL- Are fixed costs + variable costs.  AVERAGE- Are Total Costs devided by the output.

Team textiles sells shirts at £ 24 each. Complete the chart below. Is the firm making any profit? Shirts sold each week Revenue

Complete the following table for Team Textiles, assuming that its fixed costs are £ 4000 each week and its variable costs are £ 12 for each shirt produced. Shirts produced Fixed costs ($) Variable Costs ($)

Complete the following table for Team Textiles. Shirts produced Fixed costs ($)4000 Variable Costs ($) Total Costs ($)

BREAK- EVEN POINT BBreak – even point is the point at which an organisation covers its costs with the money it makes through sales. AA break-even chart is prepared in advance to see how much the business needs to sell at a particular price.

BBreak – even point is expressed in terms of the quantity of items made or sold. AAn alternative method for calculating break-even is to devide the total fixed cost by the contribution from selling each unit. TThe contribution of a product is selling price less variable cost.

CASE STUDY