Cambridge IGCSE Business Studies

## The nature of business activity A business is an organisation that uses resources to produce goods or services that customers want. Resources are limited and wants are not, so every business, like every person and government, has to choose how to use what it has. That is the root of most of the decisions in business studies. ### Factors of production The resources a business uses are called the **factors of production**, and there are four. | Factor | What it is | Reward it earns | Examples | |---|---|---|---| | Land | Natural resources and the land itself | Rent | Farmland, oil, timber, water, a shop's site | | Labour | The physical and mental effort of the people who work | Wages and salaries | Factory workers, teachers, managers | | Capital | Man-made goods used to make other goods and services | Interest | Machinery, vehicles, computers, buildings | | Enterprise | Taking the risk of bringing the other three together to produce something | Profit | The owner of a new restaurant | Capital here means physical equipment, not money, although money is often needed to buy it. The person who provides enterprise is the **entrepreneur**: they spot the opportunity, organise the other factors and accept the risk that the business may fail. Different businesses use the factors in different proportions. A farm uses a lot of land, a software firm uses mostly labour, and a car plant uses a lot of capital. ### Adding value **Added value** is the difference between the selling price…