Definitions - Unit 1 Flashcards
need
A need is a good or service essential for living
want
A want is a good or service which people would like to have but which is not essential for living. People’s wants are unlimited.
economic problem
There exist unlimited wants but limited resources to produce the goods and services to satisfy those wants. This creates scarcity
Factors of production
Those resources needed to produce goods and services. There are four factors of production, and they are in limited supply.
Scarcity
Scarcity is the lack of sufficient products to fulfill the
total wants of the population
Opportunity cost
Opportunity cost is the next best alternative given up
by choosing another item
Specialization
Specialization occurs when people and businesses
concentrate on what they are best at
Division of labour
Division of labour is when the production process is
split up into different tasks and each worker performs
one of those tasks. It is a form of specialization
Added value
Added value is the difference between the selling
price and the cost of bought-in materials and
components
The primary sector
The primary sector of industry extracts and uses the
natural resources of Earth to produce raw materials
used by other businesses
The secondary sector
The secondary sector of industry manufactures goods
using the raw materials provided by the primary
sector
The tertiary sector
The tertiary sector of industry provides services to
consumers and other sectors of industry
De-industrilization
De -industrialisation occurs when there is a decline in
the importance of the secondary, manufacturing
sector of industry in a country
Mixed Economy
Mixed economy has both a private sector and a public
(state) sector
Capital
Capital is the money invested into the business by the
owners
Entrepreneur
An entrepreneur is a person who organises, operates
and takes the risk for a new business venture
Capital employed
Capital employed is the total value of capital used in
the business
Internal Growth
Internal Growth occurs when a business expands its
existing operations
External Growth
External Growth is when a business takes over or
merges with another business. It is often called
integration as one business is integrated into another
one
Takeover
A takeover or acquisition is when one business buys
out the owners of another business, which then becomes part of the ‘predator’ business [the business
which has taken it over]
Merger
A merger is when the owners of two businesses agree
to join their businesses together to make one
business
Horizontal integration
Horizontal integration is when one business merges
with or takes over another one in the same industry
at the same stage of production
Vertical integration
. Vertical integration is when one business merges with
or takes over another one in the same industry but at
a different stage of production. Vertical integration
can be forward or backward.
Conglomerate integration
Conglomerate integration is when one business
merges with or takes over a business in a completely
different industry. This is also known as
diversification.
Sole trader
Sole trader is a business owned by one person
Limited liability
Limited liability means that the liability of
shareholders in a company is limited to only the
amount they invested
Unlimited liability
Unlimited liability means that the owners of a
business can be held responsible for the debts of the
business they own. Their liability is not limited to the
investment they made in the business
Partnership
Partnership is a form of business in which two or
more people agree to jointly own a business
Unincorporated businesses
Unincorporated business is one that does not have a
separate legal identity. Sole traders and partnerships
are unincorporated businesses
Incorporated businesses
incorporated businesses are companies that have
separate legal status from their owners
Shareholders
Shareholders are the owners of a limited company.
They buy shares which represent part-ownership of
the company.
Private limited companies
Private limited companies are businesses owned by
shareholders but they cannot sell shares to the public.
Public limited companies
Public limited companies are businesses owned by
shareholders but they can sell shares to the public
and their shares are tradable on the Stock Exchange
Dividends
Dividends are payments made to shareholders from
the profits [after tax] of a company. They are the
returns to shareholders for investing in the company.
Franchise
A franchise is a business based upon the use of the
brand names, promotional logos and trading methods
of an existing successful business. The franchisee
buys the license to operate this business from the
franchisor
Joint venture
A joint venture is where two or more businesses start
a new project together, sharing capital, risks and
profits
Public corporation
A public corporation is a business in the public sector
that is owned and controlled by the state
[government]
Business objectives
A public corporation is a business in the public sector
that is owned and controlled by the state
[government]
Profit
Total revenue-Total costs`
Market share
Market share is the percentage of total market sales
held by one brand or business
Social enterprise
A social enterprise has social objectives as well as an
aim to make a profit to reinvest back into the business
Stakeholder
A stakeholder is any person or group with direct
interest in the performance and activities of a
business
