BS-Business activity, page no 6-8

• Businesses combine scarce factors of production to produce goods or services to satisfy people's needs and wants. Business Activity: Combines scarce factors. Produces goods and services.

• Added value: Added value refers to the increased utility of a product as it passes through different production stages. This can be in the form of extra features on a product or service to increase its perceived value for the customer. Ex: The selling price of a newly built house is $100,000., The value of the bought-in bricks, cement, wood and other materials was $15,000., The added value of the building firm was $85,000. This is not all profit-out of this the builder must pay wages and other costs too.

  
  

• Why is added value important?: Value addition is a tool to increase the worth of a product for its customers. Functional value, esteem value and exchange value are the scopes of value addition. Functional value is the ability of a product to perform requisite functions to fulfil customer needs.

  
  

• How could a business increase added value: Value Added can be increased by increasing the selling price or reducing the cost of materials.

  
  

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