What is a business

The term 'business' is used to describe all the commercial activities undertaken by the various organisations, which produce and supply goods and services.

A business has many features. It is:

• A decision making organisation

• made up of groups of workers, managers, directors and shareholders

• which exists in association with customers, suppliers, competitors, the environment, local, national and other governments

• that uses factors of production

• to produce and sell goods and/or services

• so as to make a profit.(although other objectives may also be important)

factors of production

To produce goods and services requires resources. We call these the factor inputs or factors of production.

Economic resources are scarce relative to the infinite needs and wants of people and businesses operating in the economy. It is important to use these resources efficiently in order to maximise the output that can be produced from them. 

Economists make a distinction between four types of resources - land, labour, capital and enterprise:

Land

Land is not just the land we build our factories and schools upon, but also the natural resources available for production. Some nations are endowed with natural resources and exploit this by specialising in the extraction and production of these resources - for example Saudi Arabia has become very rich because it has oil.

Labour

Labour is the human input into the production process.

Capital

Capital refers to the machines, roads, factories and office blocks which human beings have produced in order to produce other goods and services. (The term is sometimes used to mean the money used to fund the business, but really for this we should use the term finance for this)

Enterprise. 

An entrepreneur is the owner or part owner of the business, in that they have taken a risk with their own money, to set the business up. They are also the manager and organiser of all the other factors of production. They must fulfill both of these to be considered an entrepreneur.