Buying and Selling Business Activity

What is Business Activity?

Business activity is carried out in order to earn money by providing goods or services through legal means in order to meet the lawful needs of others. It combines resources known as factors of production to produce goods or provide services. A business activity satisfies some of the community’s needs or wants in exchange for a monetary reward.


Theoretically, for an activity to be called a business activity, the following four conditions need to be fulfilled:

  • The activity is carried out with the aim of earning money in return (profit). However, it involves uncertainty or risk of loss as well.
  • The activity combines factors of production called resources (land, labor, capital, enterprise) to produce or generate economic goods or services.
  • The activity must be lawful in nature.
  • It must satisfy the lawful needs or wants of people.

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Needs and Wants

The goods and services we require for survival are referred to as needs, also known as basic necessities, whereas the goods and services required to make life more comfortable are referred to as wants. The first principle of economics states that needs are limited but desires are unlimited. In essence, the pursuit of desires (wants) is what allows business activities to thrive.

On the other hand, there are scarce resources. Land, labor, capital, and enterprise/skill are the resources referred to as factors of production. In any business, all of these resources are combined in such a way that they create something new (goods) or provide a service, resulting in the fulfillment of people’s needs or wants. To obtain the output of business activity, there must be some people known as consumers who require or desire that output and are willing to pay in exchange for the fulfillment of that need or desire. Production and selling, for the most part, become central to any business activity.

Choice and Opportunity Cost

The confluence of limited resources and unlimited desires creates a new conundrum known as “choice.”A choice is the unavoidable part of any business activity which forces the chooser to make decisions. This impasse costs the business and is usually referred to as an opportunity cost. An opportunity cost is simply the next best alternative given up by choosing one option over the other. Every choice or decision in business activity results in some sort of opportunity cost. The best alternative is the one that allows for the generation of more benefits than the opportunity cost of the next best alternative, which is foregone.

Entrepreneurs and Enterprise

Now, who performs the business activities or who is in charge of this whole operation? They are the ones who organize resources in order to produce goods or services that meet the needs or desires of others. People use their entrepreneurial skills to efficiently and effectively combine resources in order to produce the most output from the smallest arrangement of resources. These individuals are known as entrepreneurs, and the artificial person (firm or company) through which the activity is carried out is known as an enterprise.

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Efficiency and Specialization

The resources are limited; they need to be used efficiently and wisely. So, what exactly does efficiency imply? It denotes that the cost or consumption is low, but the value of output is high. Labor is one of the resources that must be used efficiently. As a result of the efficiency gap in labor, another useful requirement known as specialization emerges. The labor is divided into specialized groups and sub-groups that are assigned the specified tasks in order to maximize labor efficiency. It is also called division of labor. This is due to the realization that no one individual can be a jack of all trades. Specialization increases output by allowing for more efficient use of human resources.


To summarize, entrepreneurial minds or enterprise skills necessitate a basic understanding of the business activity. Entrepreneurs can make wise decisions, use resources efficiently, and generate maximum output with the least amount of input if they are familiar with the objectives and components of business activity. Familiarity with the fundamental elements of business activities enables business owners to assess the expected return on their decisions and the opportunity cost they bear.

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