1.2 BUSINESS ECONOMICS

Question 1

factors of production

Answer 1

resources used to produce goods and services, which include land, labour, capital and enterprise

Question 2

production

Answer 2

process that involves converting resources into goods or services

Question 3

human capital

Answer 3

value of the workforce or an individual worker

Question 4

labour

Answer 4

people used on production

Question 5

working capital or circulating capital

Answer 5

resources used up in production such as raw materials and components

Question 6

fixed capital

Answer 6

stock of ‘man-made’ resources,such as machines and tools, used to help make goods and services

Question 7

entrepreneurs

Answer 7

individuals who organise the other factors of production and risk their own money in a business venture

Question 8

capital intensive

Answer 8

production that relies more heavily on machinery relative to labour

Question 9

labour intensive

Answer 9

production that relies more heavily on labour related to machinery

Question 10

primary sector/industry

Answer 10

production involving the extraction of raw materials from the earth

Question 11

assembly plants

Answer 11

factory where parts are put together to make a final product

Question 12

secondary sector/industry

Answer 12

production involving the processing of raw materials into finished and semi-finished goods

Question 13

tertiary sector/industry

Answer 13

production of services in the economy

Question 14

de-industrialisation

Answer 14

decline in manufacturing

Question 15

productivity

Answer 15

rate at which goods are produced, and the amount produced related to the work, time, and money needed to produce them

Question 16

job rotation

Answer 16

practice of regularly changing the person who does a particular job

Question 17

piece rate

Answer 17

amount of money that is paid for each item a worker produces,rather than for the time taken to make it

Question 18

division of labour

Answer 18

breaking down of the production process into small parts with each worker allocated to a specific task

Question 19

specialisation

Answer 19

production of a limited range of goods by individuals, firms, regions or countries

Question 20

costs

Answer 20

expenses that must be met when setting up and running a business

Question 21

fixed costs (overheads)

Answer 21

costs that do not vary with the level of business

Question 22

variable costs

Answer 22

costs that change when output levels change

Question 23

total cost

Answer 23

fixed costs and variable costs added together

Question 24

scale

Answer 24

size of a business

Question 25

diseconomies of scale

Answer 25

rising average costs when a firm becomes too big

Question 26

economies of scale

Answer 26

falling average costs due to expansion

Question 27

internal economies of scale

Answer 27

cost benefits that an individual firm can enjoy when it expands

Question 28

bulk buying

Answer 28

buying goods in large quantities, which is usually cheaper than buying in small quantities

Question 29

external economies of scale

Answer 29

cost benefits that all firms in an industry can enjoy when the industry expands

Question 30

competition

Answer 30

rivalry that exists between firms when trying to sell goods to the same group of customers

Question 31

barriers to entry

Answer 31

obstacles that might discourage a firm from entering a market

Question 32

innovative

Answer 32

commercial exploitation of a new invention

Question 33

product differentiation

Answer 33

attempt by a firm to distinguish it’s product from that of rival

Question 34

market niche

Answer 34

smaller market, usually within a larger market or industry

Question 35

monopoly

Answer 35

situation where there is one dominant seller in a market

Question 36

new entrant

Answer 36

company that starts to sell goods or services in a market where they have not sold them before, or one of these goods or services

Question 37

price maker

Answer 37

where a dominant business is able to set the price charged in the whole market

Question 38

patent

Answer 38

license that grant permission to operate as a sole producer of a newly designed product

Question 39

natural monopolies

Answer 39

situation that occurs when one firm in an industry can serve the entire market at a lower cost thant would be possible if the industry were composed of many smaller firms

Question 40

market segments

Answer 40

groups of customers that share similar characteristics, such as age, income, interests and social class

Question 41

oligopoly

Answer 41

market dominated by a few large firms

Question 42

interdependence

Answer 42

where the actions of one country or large firm will have a direct effect on others

Question 43

price war

Answer 43

where one firm in the industry reduces price causing the others to do the same

Question 44

niche market

Answer 44

market for a product or service, perhaps an expensive or unusual one, that does not have many buyers, but that may make good profits for companies that sell it

Question 45

cartel

Answer 45

whee a group of firms or countries join together and agree on pricing or output levels in the market

Question 46

value-added (products or services)

Answer 46

products or services have an increased value because work has been done on them, they have been combined with other products and so on; this increase in value to the buyer is what the buyer pays for

Question 47

wage rate

Answer 47

the amount of money paid to workers for their services over a period of time (that is, the price of labour)

Question 48

derived demand

Answer 48

demand that arises because there is demand for another good

Question 49

labour mobility

Answer 49

easy with which workers can move geographically and occupationally between different jobs

Question 50

boom

Answer 50

time when business activity increases rapidly, so that the demand for goods increases, prices and wages go up, and unemployment falls

Question 51

boom and bust

Answer 51

when an economy regularly becomes more active and successful and then suddenly fails

Question 52

closed shop

Answer 52

company or factory where all the workers must belong to a particular trade union

Question 53

secondary picketing

Answer 53

workers in one workplace or company strike in a group at a particular location in order to support the striking workers in a different workplace or company

Question 54

inflation

Answer 54

rate at which prices rise, a general and continuing rise in prices

Question 55

anti-competitive practices (or restrictive trade practices)

Answer 55

attempts by firms to prevent or restrict competition

Question 56

fit for purpose

Answer 56

usable (by a consumer) for the purpose for which it was intended

Question 57

subsidiaries

Answer 57

companies that are at least half-owned by another company

Question 58

minimum wage

Answer 58

minimum amount per hour which most workers are legally entitled to be paid