Scarce resources are those that are limited in supply, while abundant resources are readily available. This fundamental difference significantly shapes business decision-making.

Examples of Scarce Resources:

• Oil and Gas: Essential for energy and transportation, but finite and depleting.
• Raw Materials (e.g., specific minerals): Limited deposits of certain metals or ores.
• Skilled Labour: A shortage of workers with specific qualifications (e.g., engineers, software developers).
• Land in Prime Locations: Land suitable for commercial development in urban areas is often limited and expensive.

Examples of Abundant Resources:

• Water (in some regions): While water scarcity is a growing problem, some areas have abundant water supplies.
• Basic Raw Materials (e.g., sand, clay): These are generally readily available.
• Unskilled Labour (in some regions): A large pool of workers with minimal skills may be available in certain areas.

How this affects business decision-making: Businesses must carefully consider the availability and cost of scarce resources. This often leads to:

• Investment in Resource Efficiency: Businesses seek ways to use scarce resources more efficiently to reduce waste and costs.
• Innovation and Substitution: Businesses may invest in research and development to find alternative materials or processes that require less scarce resources.
• Strategic Sourcing: Businesses may establish relationships with suppliers to secure access to scarce resources.
• Location Decisions: Businesses may choose to locate near sources of scarce resources to reduce transportation costs and ensure a reliable supply.

Adding value refers to increasing the worth of a product or service in the eyes of the customer. This can be achieved by enhancing its features, quality, or the overall customer experience. For the bakery, adding value can lead to higher prices and increased customer loyalty. Here are three ways the bakery could add value:

• Improved Ingredients: Using higher quality, locally sourced ingredients (e.g., organic flour, free-range eggs) can enhance the taste and perceived value of the products. Customers are often willing to pay more for better quality.
• Enhanced Product Design: Introducing new and innovative product designs, such as themed cakes, artisanal breads with unique flavour combinations, or visually appealing pastries, can make the bakery's offerings more desirable.
• Excellent Customer Service: Providing friendly, efficient, and personalized customer service (e.g., remembering regular customers' orders, offering samples, creating a welcoming atmosphere) can significantly improve the customer experience and build loyalty. This adds value beyond just the product itself.

By implementing these strategies, the bakery can differentiate itself from competitors and justify higher prices, ultimately increasing its profitability.

Opportunity cost is the value of the next best alternative forgone when making a decision. It represents what you give up when you choose one option over another. It's not just about the monetary cost, but also the potential benefits you miss out on.

Example: A student has to decide between studying for an exam or working a part-time job. If the student chooses to study, the opportunity cost is the wages they could have earned from working. Conversely, if they choose to work, the opportunity cost is the potential improvement in their exam grade that could have resulted from studying. The student must weigh the benefits of each option to make the most rational decision.