Chapter 1 Flashcards
Economic problem
An economic problem is when we have limited resources due to scarcity, but have unlimited wants
Added value
The difference between the selling price of a product and the cost of bought in materials and components
Primary sector
The primary stage of production.This involves the earth’s natural resources
E.g - farming, fishing ,forestry
Secondary sector
Taking materials from the primary stage and turning it into something that can be used
Private sector
Owned by private individuals
Advantages of being an entrepreneur
- independence
- able to put own ideas into practice
- may become famous and successful, if the buisness grows
- profitable
- use personal interests and skills
Disadvantages of being a entrepreneur
- risk
- capital-(putting their own money into the buisness)
- Lack of knowledge
- opportunity cost -(not being a worker at another country)
Values of output
- A way of comparing buisness sizes in the same industry
- the amount of profit gained by a company
Value of capital employed
The amount invested in a buisness
Horizontal integration
Two companies joining, that work in a similar industry
Forward vertical integration
E.g - a car manufacturer takes over a car retailing buisness
Private sector
- sells their stocks privately (share holders have limited liability)
- gains more profit
- hospitals, buisness,
- lots of documentation required
Public sector
- as many shareholders (limited liability)
- can raise large capital funds)
- no restriction in shares
- legal formalities r complicated
- more controlled by government
Franchisers
Coco cola (franchisor) does not have a store it franchises it’s products to other companies like McDonald’s (franchisee)
