Buisness unit 1.1, 1.2, 1.3, 1.4, 1.5 Flashcards
what is scarcity?
when there are needs but not enough products and services to fufill them
what are needs?
something necessary
what are wants?
something that is not necessary
what is an economic problem?
when there are unlimited wants but limited resources to fulfil them (creates scarcity)
what is opportunity cost?
is the next best alternative given up by choosing another item
what is specialisation?
when people and businesses concentrate on what they are best at.
what is the division of labour?
is when the production process is split into different tasks and each worker performs one of the specific tasks only.
what is an advantage of division of labour? (2)
- trained one task per worker –> increases efficiency and output
- less time is wasted moving from one workbench to the other
what is a disadvantage of division of labour? (2)
- workers can be too bored to perform one task –> efficiency might fall
- one worker absent –> no one can fill in
what is the purpose of buisness activity?
to combine the factors of produyction to make products which will satisfy the peoples wants
what is added value?
is the difference between the selling price and the cost of bough it materials
(selling price - cost of bought in materials)
why is added value important? (2)
- helps pay for expenses (labour, advertising, bills)
- helps make a profit
how could a business increase added value? (2)
- by increasing selling price
-by reducing cost of bought in materials
what is the primary sector?
extracts and uses the natural resources of earth to produce raw materials for the buisness
what are examples of the primary sector? (4)
-farming
-fishing
-forestry
-oil, copper ore
what is the secondary sector?
manufactures goods using the raw materials provided by the primary sector
what are examples of the secondary sector? (3)
-car manufacturing
-footwear production
-paper manufacturing
what is the tertiary sector?
provides services to consumers and the other sectors of the industry
what are examples of the tertiary sector? (5)
-hair salons
-IT services
-banking
-transport
-education
what is a mixed economy?
an economy with both a private sector and a public sector
what is a private sector?
businesses owed by private individuals and not by the government
what does a private sector do?
they decide on the price to charge for the goods/services.
what is the private sector’s aim?
to make profit
what is a public sector and where does the money for it come from?
a buisness owned and run by the government, the money for these come from taxpayers
what is the objective of a public sector?
is to provide welfare to its people in the economy
what are the characteristics of a successful entrepreneur? (4)
-hardworking
-risk taker
-creative
-optimistic
what is a buisness plan?
a document containing the buissness objectives, details about finance, operations and owners of the business
why is it important for an entrepreneur to create a business plan? (2)
- to apply for bank loans
- it will force entrepreneurs to think ahead and to try and solve any potential problems
contents for a business plan (5)
- description of buisnes
- products and services they provide
- target market
- location of business
- financial information
why do the governments support new startup firms? (3)
- will create jobs –> reduce unemployment in the country
- increase output
- will give consumers more choice of goods and services
how do the governments support new firms? (2)
- offer to train entrepreneurs who want to develop more skill
- offer grants to so they can afford to open up a business
why do owners want to expand the business? (3)
- to increase profit
- to benefit from economies of scale
- more status and prestige for owners
hoe do you measure the size of a business? (4)
-number of employees
-the value of output
-the value of sales revenue
-capital employed
how can businesses grow what are the two types of growth?
- internal growth
- external growth
what is internal growth?
when a business expands its exsiting operatinons
what is external growth?and what are the three types
when a business takes over or merges with another company (three types - horizontal, vertical, congiomerate)
what is horizontal intergration?
when a business merges or takes over another buisness in same stage of production
what are the benefits of horizontal integration? (2)
- less competition in the same industry
- benefit for money
what are the drawbacks to horizontal integration? (2)
- diseconomies of scale
-communication in business is more challenging bc the business is bigger
why do businesses fail? (3)
- lack of management skills - managers may not make good decisions, like location and production
- changes in the business environment - new competitors, recessions
- liquitidy problems - current ratio under 1.5 not being able to pay day to day expenses
what is unlimited liability?
the owner of the business is responsible for the debts, so their personal possessions might be at risk
what are incorporated businesses?
businesses that have separate legal status from their owners
what are unincorporated businesses?
businesses that DONT have separate legal status from their owners
what is an advantage of a sole trader? (3)
- get to keep all profits
- complete control–> make all decisions
- less legal requirements so it’s easier and cheaper
what is a sole trader
a business owned by one person
what is a partnership?
a business owned by two or more people
what is a disadvantage of a sole trader? (2)
- unlimited liability
- limited sources of finance –> less money for machinery
what is an advantage of a partnership? (3)
- more money can be invested in the business
- less stress and responsibility
- more ideas–> better products
what are private limited companies?
a business owned by shareholders but they can’t sell shares to the public
what is a disadvantage of a partnership? (3)
- profits have to be shared
- disagreements can happen–>less attention on business
- unlimited liability
what is a disadvantage of a private limited company? (2)
- cannot sell shares to the public –> less capital
- expensive as there’s a lot of paperwork
what are public limited companies?
a business owned by shareholders and sell shares to the public
what is an advantage of a private limited company? (3)
- can raise more capital
- limited liability
- maintain control of business
what is an advantage of a public limited company? (2)
- can raise more capital by selling shares to the public
- limited liability
what is a franchise?
a buisness with a strong brand name, and the owner gives consent for the franchisee to use the name
what is a disadvantage of a public limited company? (3)
- the original owner may lose control
- needs to pay shareholders dividends so less profit for the original owner
- expensive as there’s a lot of paperwork
what is an advantage of a franchise? (2)
- the franchisor receives part of the profits known as royalties
- less stress for franchisee
what is a disadvantage of a joint venture? (2)
- profits are shared
- disagreements between businesses
what are public corporations?
business in the public sector that is owned and controlled by the government
what are joint ventures?
two or more businesses start a new project together, sharing risks and profits.
what is a disadvantage of a franchise? (2)
- Poor management and a bad reputation of one branch can risk ruining the entire brand’s reputation
- don’t get to keep 100% of profits
what is an objective?
an aim or a target a business works towards
what is an advantage of a joint venture? (3)
- both businesses share the costs of the project
- risk is shared
- each business will benefit from other businesses knowledges
what is a disadvantage of public cooperation?
- they may not be as efficient as a private company because there is no huge profit motive
what is an advantage of a public corporation?
- It makes sure consumers are not taken advantage of by privately owned monopolies
why are objectives important? (2)
- they give workers and managers a clear target to work towards, increasing their motivation
- can allow the business to compare against their performance to see if they are successful or not
what are some business objectives? (4)
- survival
- to make profit
- growth
- increase in market share
what are social enterprises?
operated by private individuals but have other objectives other than profit
what are examples of social enterprises? (2)
- helping the community
- helping the environment
what are examples of internal stakeholders and their objective (3)
- owner - they want the business to grow and gain profit
- employees - they want a fair salary, good working conditions, job satisfaction and job security
- managers - they want job security and profits
what are stakeholders?
a person or group who have a direct interest in the performance and activities of the business
what are examples of external stakeholders and their objective? (4)
- customers - they want safe and reliable products with high quality
- government - they want to ensure the business is running by the laws, they also want them to succeed because the business can provide jobs they can earn corporation tax from business profits
- the local community - they want to ensure the business doesn’t damage the local community, and they are interested because they might want to get a job
- banks - they want the business to be able to pay back bank loans, with interest
what are the differences in the objectives of private sector and public sector enterprises?
private sector wants to make profit and public sector enterprises want to provide services to the public, create employment and make profit to have a sustainable business.
what are the four factors of production?
- land
- labour
- capital
- eneterprise
