The Costs of Business Activity - What do we mean by the price of progress? Give an example.

2. All communities are made up of individuals and groups who have different views about whether a particular decision is good or bad so it’s important to look at the social benefits and social costs of business activities.

Explain the following terms:

3. List the benefits of business activity.

1. It provides employment. Millions of people are employed in industry and commerce.

2.  It creates wealth. Shareholders receive profits, landlords receive rent, lenders receive interest, workers receive wages, etc.

3. It creates products. Value is added at each stage of production to create more valuable end-product.

4. It raises living standards. By creating wealth, industry makes it possible for people to enjoy better living standards and more leisure time.

4. List the costs of business activity.

5. Production costs
6. Marketing costs
7. Financial costs
8. Administration costs
9. Distribution costs

5. What do we mean by the term spillover costs?

This is a term given to the external costs which go beyond the trading account of the firm.