Explain what a business is, the difference between needs and wants, and how a business uses inputs to make goods or provide services for customers

What this dot point is asking

You need to explain, in simple words, what a business is. A business takes in things called inputs (such as materials, money, equipment, and staff time) and turns them into goods or services that it sells to customers. You should be able to tell the difference between a need and a want, and between a good and a service, and say why a business exists at all. Keep your answers practical and tied to everyday Singapore shops and services.

The answer

What a business is

A business is an organisation that makes goods or provides services for customers, usually to earn money. A coffee shop, a clinic, a phone repair stall, and a bus company are all businesses. Some businesses are very small (a single hawker stall) and some are very large (a supermarket chain), but they all do the same basic job: they meet a customer need or want and try to earn money doing it.

Needs and wants

A need is something a person must have to live. Food, clean water, clothing, and shelter are needs. A want is something a person would like to have but can live without, such as a bubble tea, a new phone case, or a holiday.

Businesses are built around needs and wants. A wet-market stall meets the need for food. A toy shop meets a want. Many businesses meet both at once: a cafe sells a plain kaya toast (close to a need) and a fancy iced latte (a want).

Goods and services

A good is a physical thing you can touch and keep, such as a loaf of bread, a shirt, or a bottle of shampoo. A service is something useful that is done for you, such as a haircut, a bus ride, or having your phone repaired. You cannot touch a service, but you still pay for it.

Many businesses provide both. A restaurant sells food (a good) and also serves and clears your table (a service).

Inputs: what a business uses

To make its goods or provide its service, a business uses inputs. The main ones are:

• Materials - the raw things used up, such as flour for a bakery.
• Labour - the work that people do, such as the staff serving customers.
• Equipment - the tools and machines, such as an oven or a cash register.
• Money - the cash needed to buy the materials and pay the staff.

The business turns these inputs into outputs (the goods or services) and sells them to customers.

Why a business exists

A business exists for two main reasons: to meet a customer need or want, and to earn money for its owner. If a business charges more for its output than its inputs cost, the extra is called profit. Without customers there is no business, so meeting needs and wants well is the first job.

Examples in context

Example 1. A hawker stall selling chicken rice. The inputs are rice, chicken, and other ingredients (materials), the hawker's work (labour), a stove and steamer (equipment), and the cash to buy supplies (money). The output is a plate of chicken rice (a good) served quickly (a service). The customers are people who need lunch. The stall earns money by charging more than the ingredients cost.

Example 2. A nail salon in a neighbourhood mall. Here the main output is a service - a manicure - that you cannot touch but still pay for. The inputs are nail polish and remover (materials), the manicurist's skill and time (labour), and the chairs and tools (equipment). The customers have a want, not a need. This shows that a business can provide mostly services rather than goods.

Try this

• Cue. State two goods and two services that a hotel provides, and explain the difference between a good and a service in one sentence. Think about what you can touch (the bed, the toiletries) versus what is done for you (cleaning the room, carrying your bags).

• Cue. A customer buys a packet of rice and a movie ticket. Say which is meeting a need and which is meeting a want, and explain why. Remember that a need is something you must have to live, while a want is something you would like but can do without.

• Cue. List four inputs a coffee shop uses and name the output, then explain in one sentence why the coffee shop counts as a business. Cover materials, labour, equipment, and money, then link inputs to outputs, customers, and earning money.