In this chapter, “Understanding Business Activity” we will cover the following main topics of 0450 Business Studies for IGCSE and 7115 O-Level Business Studies in detail. You can get IGCSE Revision Notes, Activities, Worksheets, Past Papers, Topical, Exam Style Questions from Sir Afzal Shad.

  • Needs
  • Wants
  • Difference b/w needs and wants
  • Economic Problem
  • 4 Factors of Production
  • Land
  • Labour
  • Capital
  • Enterprise
  • Activity of Factors of Production
  • Scarcity of Resources
  • Opportunity Cost

Step 1: Watch Lecture of Chapter 1 Business Studies (Part 1)

Step 2: Solve Chapter 1 Business Studies Worksheet

Once you have watched the complete video (part 1) of Chapter 1 Business Studies, have a look at the questions below and try to solve them:

You can Download the Worksheet of Chapter 1 – Understanding Business Activity

Step 3: Understanding Business Activity Revision Notes

Purpose of Business Activity

  • The production of finished goods involves several stages, where value is added to resources like
  • raw materials, making them more desirable to the final purchaser.
  • Business activity is essential as it allows us to access goods and services that we cannot
  • produce ourselves, leading to a higher standard of living.
  • Without business activity, we would be reliant solely on what we can make or grow on our own.
  • Business uses the planet’s scarce resources to create goods and services for our benefit.

Factors of Production


  • Natural resources: Coal, Iron ores, water, fisheries, mines
  • Land: Agricultural Land, Land used to erect any building


  • Unskilled humans: General Labour
  • Skilled humans: Managers, Directors, Supervisors, Architects


  • Money invested in business
  • Assets: Machinery, Equipment, Building


  • Risk takers
  • Decision makers
  • Combining all factors of production.
  • Coordinate inside & outside the business.

Factors of Production – An Example:

The restaurant (Hardees) requires factors of production.

  1. Land: The location where the outlet will initiate its operations
  2. Labour: Cashier, Janitorial Staff, Manager, Chef
  3. Capital: Initial investment, machinery, equipment.
  4. Entrepreneurship: The franchisee is taking the risk (failure), Owner manage all FOP’s

Specialisation – Understanding Business Activity

Specialization is when people concentrate on a specific task and become expert at it.
When employees are divided to perform a specific task in a business, it’s called division of labour. This division leads towards specialization.
Example: A doctor specializing in cardiology focuses solely on heart-related medical issues, allowing them to develop a deeper understanding and expertise in that specific field.
Similarly, a company specializing in producing electric vehicles concentrates solely on the research, development, and production of electric cars.

Advantages of Specialisation – Understanding Business Activity

  • Employees can make best use of their particular talents and skills.
  • Employees can increase their skills and experience by repeating tasks
  • Employees can produce more output and reduce business costs if they concentrate on the same job or tasks.

Disadvantages of Specialisation – Understanding Business Activity

  • Individuals must rely on others to produce the goods and services they want but cannot produce themselves
  • Workers can become bored doing the same job or completing repetitive tasks. The quality and efficiency of their work may fall
  • Many repetitive manual tasks are now undertaken by computer-controlled machinery and robots. This has reduced job satisfaction for many workers and reduced employment opportunities for many low-skilled workers

Chapter 1 Business Studies Revision Notes for IGCSE & O-Levels are written by Sir Afzal Shad. If you want to buy notes Online, please contact us

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  • 19+ Years of Teaching Experience to IGCSE/O-Level Students
  • To the Point and Cambridge Endorsed Definitions & Explanations
  • Sample Answers from the Past Papers
  • Activities / Case Studies included for Practice

Want to Ask Question about Understanding Business Activity?

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Needs, Wants, Difference b/w needs and wants, Economic Problem, 4 Factors of Production, Land, Labour, Capital, Enterprise, Activity of Factors of Production, Scarcity of Resources, Opportunity Cost.

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