The Purpose of Economic Activity
- The central purpose of economic activity is the production of goods and services to satisfy needs and wants
- Needs are essential for survival, eg. food and shelter
- Wants are desires for goods and services that are not essential, eg. electronics
- The demand for needs and wants are infinite, while the supply of resources needed to produce them is finite
Diagram: The Purpose of Economic Activity
The purpose of economic activity is to take inputs, add value to them, and create products which meet customer needs and wants
To produce goods or services
- The primary purpose of business activity is to produce goods or services that satisfy a need or demand in the market
- Goods are physical products, such as bicycles and T-shirts
- Services are non-physical items such as hairdressing, tourism and manicures
Meeting customer needs
- The ultimate goal is to create products that meet the needs and preferences of customers and provide value to them
- By meeting customer needs, businesses can build customer loyalty, increase brand awareness, and generate revenue
To add value
- The third purpose of business activity is to add value to products or services
- Value-added features can differentiate products from competitors, create a unique selling point, and increase customer satisfaction
- E.g. a product that is easier to use, has a better design, or is of higher quality than competitors can create a competitive advantage for a business