Business Activity Flashcards
Need
A good or service that is essential for living.
Want
A good or service which people would like to have, but is not essential for living. People’s wants are unlimited.
What is the economic problem?
There are unlimited wants, but limited resources to produce the good and services to satisfy those wants (this creates scarcity).
Scarcity
The lack of sufficient materials to fulfill the wants of the entire population.
Factors of production
The resources needed to produce goods and services.
What are the four factors of production?
- Land
- Labour
- Capital
- Enterprise
Land
All the natural resources provided by nature (for example: fields, forests, oil, gas, metals etc.).
Labour
The number of people available to produce products.
Capital
The finance, machinery and equipment needed for the manufacture of goods.
Enterprise
The skill and ability of the person who brings the factors of production together to produce a good or service (for example: a business owner).
Opportunity cost
The benefit that could have been gained from an alternate use of the same resource.
Specialization
People and businesses concentrate on what they are best at.
Division of labour
Production is divided into separate tasks and each worker does just one of those tasks.
Primary sector
The primary sector of industry extracts and uses the natural resources of the earth to produce raw materials used by other businesses.
Secondary sector
The secondary sector of industry manufactures goods using raw materials provided by the primary sector.
Tertiary sector
The tertiary sector of industry provides services to consumers and the other sectors of the industry.
De-industrialization
It occurs when there is a decline in the importance of the secondary, sector of industry in a country.
Mixed economy
A mixed economy has both a private and a public sector.
Private sector
Businesses not owned by the government.
Public sector
Government owned and controlled businesses and organizations.
Entrepreneur
An entrepreneur is a person who organizes, operates and takes the risk for a new business venture.
Business plan
A document containing them business objectives and important details about the operations, finance and owners of the new business.
Value
How much something is worth.
Business size
Measured by:
- Number of employees
- Value of output
- Value of sales
- Value of capital employed
Capital employed
The total value of capital used in the business.
Internal growth
Internal growth occurs when a business expands its existing operations
External growth
When a business takes over or merges with another business.
Integration
Integration is when one firm is integrated into another one.
Merger
When the owners of the two businesses agree to join their firms together to make one business.
Takeover
A takeover is when one business buys out the owners of another business.
Horizontal integration
When one firm merges with or takes over another one in the same industry at the same stage of production.
Vertical integration
When one firm merges with or takes over another one in the same industry but at a different stage of production.
Conglomerate integration
When one firm merges with or takes over a firm in a completely different industry.
Sole trader
A business owned by one person.
Liability
Being responsible for something (especially by law).
Limited liability
The liability of shareholders in a company is limited to the amount they invested.
Unlimited liability
The owners of a business can be held responsible for the debts of the business. Their liability is not limited to the investment they made in the business.
Partnership
A form of business in which two or more people agree to jointly own a business
Shareholders
The owners of a limited company. They buy shares which represent part ownership of a company.
