CAIE A-Level Business

## Purpose of business activity A **business** is an organisation that uses resources to produce goods or services that people want, in order to meet some objective. Most private businesses aim for profit, but a business may also exist to provide a public service, to serve a community or to meet social or environmental aims. What every business shares is that it takes inputs, changes them into something customers value, and has to cover its costs from what it earns or is given. A **good** is a physical product that can be touched and stored, such as a phone or a loaf of bread. A **service** is an activity done for a customer, such as a haircut, a bus ticket or a bank loan, and it cannot normally be stored. ## Factors of production Four resources are needed to produce anything, and businesses have to pay for each of them. | Factor | What it is | Reward paid for it | |---|---|---| | Land | Natural resources: land itself, minerals, water, forests, fish | Rent | | Labour | The physical and mental effort of the workforce | Wages and salaries | | Capital | Man-made resources used to produce more: machinery, buildings, vehicles, computers | Interest | | Enterprise | The risk-taking and organising of the other three factors, done by the entrepreneur | Profit | Businesses differ in how heavily they use each factor. A software company uses a great deal of skilled labour and little land, whereas a mining company needs much more land and capital. The mix a business chooses affects its…