Presentación business

BUSINESS STUDIES

The economic problem

Needs

WantsResources

NEEDS

Goods or services essential for living.

WANTS

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

The factors of production are limited in supply.

There are never enough to produce all the needs and wants of a whole population.

There is an economic problem.

THE NEED TO CHOOSE

As there are limited resources for unlimited wants, people have to decide which wants they will satisfy and which they will not.

OPPORTUNITY COST It is the next best alternative given up by

choosing another item. A B

Car A or car B? The individual chooses car B.Therefore, car A is the opportunity cost.

COSTS – REVENUE - PROFIT.

COSTS- Expenses incurred by a firm in producing and selling its products. They include expenditure on wages and raw materials.

REVENUE- It is the amount of money a firm gets from selling a good or service.

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.

EXERCISE

Team textiles sells shirts at £ 24 each. Complete the chart below.

Is the firm making any profit?

Shirts sold each week

0 100 200 300 400 500 600 700 800

Revenue

EXERCISE

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 0 100 200 300 400 500 600 700 800

Fixed costs ($)

Variable Costs ($)

0 100 200 300 400 500 600 700 800 9000

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

11000

Production variable and fixed costs per week

Number of shirts sold each week

Co

sts

(£)

EXERCISE

Complete the following table for Team Textiles.

Shirts produced

0 100 200 300 400 500 600 700 800

Fixed costs ($) 4000 4000 4000 4000 4000 4000 4000 4000 4000

Variable Costs ($)

0 1200 2400 3600 4800 600 7200 8400 9600

Total Costs ($)

0 100 200 300 400 500 600 700 800 9000

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

Production costs and revenue per week

Number of shirts sold each week

Co

sts

and

rev

enu

e ($

)

0 100 200 300 400 500 600 700 800 9000

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

Production costs and revenue per week

Number of shirts sold each week

Co

sts

and

rev

enu

e ($

)

0 100 200 300 400 500 600 700 800 9000

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

Production costs and revenue per week

Number of shirts sold each week

Co

sts

and

rev

enu

e ($

)

Break-even point

BREAK- EVEN POINT Break – even point is the point at which

an organisation covers its costs with the money it makes through sales.

A break-even chart is prepared in advance to see how much the business needs to sell at a particular price.

BREAK- EVEN POINT Break – even point is expressed in

terms of the quantity of items made or sold.

An alternative method for calculating break-even is to devide the total fixed cost by the contribution from selling each unit.

The contribution of a product is selling price less variable cost.

CASE STUDY