1.1.1 The purpose and nature of business activity
Instruction :
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Go through all instructions and course details thoroughly before starting each lesson or activity.
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Watch the attached video lessons attentively and take clear, organized notes in your notebook.
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Write all answers for the attached worksheets in your notebook. Make sure your work is neat and properly labeled.
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Revise your notes and completed worksheets after each lesson to reinforce understanding.
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If you face any difficulty or have questions, note them down and contact your instructor or course coordinator for guidance.
Click to download the Video Lecture Handout.
Good morning, students. Today we’re starting one of the most important topics in Business Studies — The Purpose and Nature of Business Activity. Don’t worry, we’ll keep it simple and use real-life examples you can relate to. By the end of today’s lesson, you should clearly understand why businesses exist and how they actually work.”
Needs, Wants, Scarcity, Opportunity Cost
Let’s begin with needs and wants.
Needs are the basics we can’t survive without — food, water, shelter, clothes, healthcare. If these are missing, life becomes very difficult.
Wants, on the other hand, are everything extra we desire. For example, you need clothes, but you might want a designer hoodie or the latest sneakers. The key thing is — wants are unlimited, but resources are limited.
And that brings us to scarcity. We don’t have endless land, money, or labour. Every country has to make choices on how best to use what they’ve got.
Now, when you choose one thing, you give up something else. That’s called opportunity cost. Opportunity cost refers to what you have to give up to buy what you want in terms of other goods or services. Suppose you have money for either a burger or a milkshake. If you buy the burger, your opportunity cost is the milkshake you didn’t have. Businesses face this too — if they spend on advertising, they might have to delay buying new equipment.”
Purpose of Business Activity & Sectors
So why do businesses exist? Simple — to satisfy needs and wants by producing goods and services.
Think of a school uniform business. They combine fabric, workers, and sewing machines to make uniforms, which parents buy for their children.
Business activity is usually divided into three sectors:
- Primary — like farming, mining, fishing.
- Secondary — like factories making cars, clothes, or houses.
- Tertiary — services like transport, retail shops, education, and healthcare.
Each sector is connected. For example, cotton from farming (primary) goes to a textile mill (secondary), and then to a clothing shop (tertiary).
Specialisation
“Now let’s talk about specialisation. This simply means focusing on what you’re best at.
For example, in a bakery, one worker might only bake cakes, while another only decorates them. They get better and faster at their task, which improves quality and saves time.
But, too much specialisation can cause problems — imagine if demand for decorated cakes drops, or if workers get bored doing the same thing every day.”
Adding Value
“One of the most important ideas in business is adding value. This means increasing the worth of a product so customers are willing to pay more for it.
The formula is:
Added Value = Selling Price – Cost of Inputs.
Let’s say a chair costs $15 in wood, but after making and designing it, it sells for $50. The added value is $35.
Businesses can add value in many ways: by improving quality, creating a strong brand, designing something unique, offering better customer service, or even through attractive packaging.
Think about why people pay extra for an iPhone compared to a regular phone — it’s the design, the brand, and the extra features that add value.”
Closing & Summary
“So, to wrap up, needs are the essentials we cannot live without, while wants are unlimited extras that make life more enjoyable. Since resources are scarce, we are forced to make choices, which leads to the concept of opportunity cost. Businesses exist to satisfy both needs and wants, and they operate in the primary, secondary, and tertiary sectors. Specialisation helps make production faster and more efficient, though it also comes with certain risks. Finally, adding value is what makes businesses competitive and profitable. If you understand these basics, you already have the foundation for the entire subject of Business Studies. Great work today
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