Business AS · Business and its environment. The idea in plain words, the rules to remember, the mistake to avoid and a worked example, written and checked by Mega Lecture.
A business takes resources and turns them into goods and services that customers want. The resources are the four factors of production: land, labour, capital and enterprise. Resources are scarce but wants are unlimited, so every choice has an opportunity cost: the next best alternative given up.
A business succeeds by adding value, which means selling a product for more than the cost of the materials bought in to make it.
Entrepreneurs take the risk of starting a business. Intrapreneurs bring new ideas inside an existing business. A business plan sets out the idea, the market, the people and the financial forecasts, mainly to win finance and to guide the owner.
Students say value added is the same as profit. It is not: value added is price minus bought-in materials only, and wages, rent and other costs must still be paid out of it before any profit is left.
Answer: Value added per table rises by $15, from $90 to $105.
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