CAIE AS Level Business 9609: Scarcity Overview

Study Notes

Occurs due to limited resources and unlimited wants, forcing choices.
Opportunity cost represents the next best alternative forgone when a choice is made.

Businesses add value to raw materials and semi-finished goods to meet needs and wants.
This practice contributes to raising living standards and creates employment opportunities.

Land: Natural resources used in production; return is rent.
Labour: Manual and skilled work; return is salary or wages.
Capital: Finance and man-made goods (e.g., machinery); return is interest.
Enterprise: The driving force that organizes the other factors; risks new ventures; return is profit.

Defined as added value = selling price - cost price, distinct from profit.
Strategies to increase added value include:
- Raising selling price via higher quality goods, improved advertising, enhanced packaging, or product upgrades.
- Lowering cost price through efficient production methods, reducing waste, sourcing cheaper supplies, and optimizing worker training and technology.

Traits include innovation, commitment, self-motivation, multiskilled abilities, strong leadership and communication skills, self-confidence, and resilience.

Identifying Business Opportunities: Finding profitable markets with sufficient demand.
Sources of Inspiration: Ideas may stem from personal skills, prior employment, or low-cost market research.
Sourcing Finance: Financial challenges arise from inadequate personal funds, unawareness of available grants/subsidies, and insufficient trading history for loan acquisition.
Choosing a Location: Must consider costs, target market potential, and area status.
Building a Customer Base: A critical component for business sustainability and growth.