EMS Exam 22 November Flashcards
What is the meaning of capital
Capital is anything that increases one’s ability to generate value.
1) Financial capital (money) raised to operate and expand a business. Accountants distinguish between borrowed capital and own capital used to establish and run a business.
What is Financial capital
Financial capital is the money that is used to generate income or invest in a business.
What is borrowed capital
Borrowed capital is any money borrowed by an entrepreneur or business owner for the purpose of establishing and running a business.
What is own capital
Own capital refers to any money (that comes from personal savings) invested in the business by the entrepreneur or owner.
Where is money usually borrowed from
Money is most often borrowed from a bank or an investor (often a family member or friend) who has confidence in the future profitability of the business.
What funds do new entrepreneurs use to begin with
Most entrepreneurs begin their business by using their own savings, showing that they believe in their business idea and plan. They are willing to risk their own money in their business venture.
Why are financial institutions more likely to invest in entrepreneurs that have used their own money to start their businesses?
Financial institutions (such as banks) prefer to lend money to a business owner who has already invested in his or her own business. This is because they believe the business owner is more likely to work harder and try every means possible to avoid his or her business failing. This provides greater security for any borrowed money.
What are some other forms of capital?
Capital generally refers to goods that help to produce other goods in the future, the result of investment.
What features do capital goods have
They can be used in the production of other goods (this is what makes capital a factor of production).
They are human-made.
They are not used up immediately in the process of production, unlike raw materials.
They are stock items and their value can be calculated at a point in time.
Can capital goods be used in the production of other goods
Yes
What are the 4 factors of production
Labour
Land/Natural Rescources
Entrepreneurship
Capital
What is labour
Labour is one of the main factors of production.
Labour refers to the mental and physical efforts of people used for the production of goods and services.
The Human energy and mental skills are used to produce economic goods.
What does the supply of labour depend on
The supply of labour depends on:
the size of the population
its geographical distribution in relation to businesses and resources
its level of education and training its organisation (in terms of trades unions and similar organising agencies)
its composition by age and gender.
What are the 3 types of labour
Unskilled
Semi- Skilled
Skilled
What is unskilled labour
Unskilled labour refers to workers that have had no skills training or experience in any particular working environment.
Extra note don’t learn |
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(The South African labour market is flooded with unskilled workers, most of whom are unemployed.)
What kind of work does unskilled labour involve
The work of unskilled labour involves the performance of simple duties which need little or no independent judgement or previous experience. Examples of unskilled labour include general farm work, cleaners, sweepers and loaders.
What is semi-skilled labour
Semi-skilled labour refers to workers that have more training and skill than unskilled labour but less training than skilled labour.
What kind of jobs does semi-skilled labour involve?
A semi-skilled worker can carry out a simple job with the help of simple tools and machines. Examples of semi-skilled jobs are assistant plumbers and electricians, waiters and trainee motor mechanics.
For example, waiters need to train before they can start working at a restaurant. They also need to learn what is on the restaurant’s menu so that they can assist customers.
What is skilled labour
A skilled worker is any worker who has some special skill, knowledge, or who has acquired ability in their work. A skilled worker may have studied at a college, university or technical school, or have learned their skills ‘on the job’.
What are some examples of jobs that require skilled labour
Examples of jobs that require skilled labour are computer programmers, chefs, hairdressers, draughtsmen and motor mechanics. Skilled labour is more costly than unskilled and semi-skilled labour.
Why are wages and salaries important to production
Wages and salaries form part of production costs so it is important that a business employs the most suitable qualified people in particular jobs, to carry them out efficiently and cost-effectively.
What is the success of a business dependent on
The performance of the workers
What are some other laws that protect workers
Other laws that protect workers are the Employment Equity Act and the Labour Relations Act.
There is also an organisation, the CCMA that helps ensure fair employment practices in the workplace.
What does the employment equity act ensure
The Employment Equity Act makes sure that businesses treat their workers fairly by removing all forms of discrimination in the workplace. It also covers affirmative action measures that apply to certain designated employees.
What does CCMA stand for
Commission for Conciliation, Mediation and Arbitration
What is the role of the CCMA
Its role is to resolve (mediate) labour disputes referred to it in terms of the Labour Relations Act.
Employers generally treat their employees fairly in order to keep good, reliable workers.
What are some natural resources
Natural resources (most often referred to as land by economists) are the naturally occurring materials of the planet that are used for the production
Natural resources
of goods and services, including:
the minerals and nutrients in the ground
the water
the land itself
vegetation on the surface
wildlife
air.
What is production
Production is, in fact, the basic process of transforming naturally occurring materials that provide little satisfaction to people in their natural state, to goods and services that provide more satisfaction to people.
What falls under the definition of land
Everything physical (other than people) which is not the result of human effort falls within the economic definition of land.
This concept therefore includes all natural materials, forces and opportunities. The trees in a naturally occurring forest are land; in a cultivated forest they are wealth.
To understand the meaning of land as a factor of production, we must think of land in this sense, as the entire set of natural opportunities.
What is entrepeneurship
Entrepreneurship is the special sort of human effort that takes on the risk of bringing labour, capital and natural resources together to produce goods.
Entrepreneurship is the factor that organises the other three. Without someone to organise production, the other three factors do not produce. This resource takes the risk of organising production before anything is produced and with no guarantee that production will be successful.
What is a key component of entrepreneurship
A key component of entrepreneurship is risk.
What is an entrepreneur
An entrepreneur is a person who starts a business, taking a financial risk in the hope of making a profit. A successful entrepreneur makes sure that the product or service meets the needs or wants of the people he or she will sell to.
Some characteristics of an entrepreneur are:
hard working
prepared to take risks
prepared to persevere
good with people
motivated
able to work on their own.
innovative
How do entrepreneurs affect the economy
Entrepreneurs stimulate the economy by creating jobs and further opportunities for other entrepreneurs. They also generate profit that can be taxed by the government.
What is the payment of labour called
The payment of labour is wages and salaries. The economic term is ‘wages’.
How does the amount of money paid in wages and salaries differ (from labour groups)
The more competition there is for available job openings, the less money people are offered to do the work.
However, highly skilled and specialised workers tend to be scarce and are therefore paid more as a reward for their efforts in improving their own knowledge and skills, and also to entice them to accept a particular job offer.
What is the payment for entrepreneurship
Profit is the payment for entrepreneurship.
What is the payment for the use of capital
Borrowed capital is paid for in interest charged on a loan from a bank or investor in the business. Own capital is also paid for by interest lost as the capital is not invested in a financial institution and therefore does not earn interest for the owner.
What are overhead costs
business expenses, such as rent, that are not directly attributable to any department or product
What is the payment for the use of land and business premises
Rent is paid for the use of land and business premises. If the property is owned by the business, the rental that could be charged for the use of the property by other parties is taken as the rental cost to calculate overhead costs.
What are the 10 types of markets
Wholesale Retail Farmers Craft Flea Service Factor Labour Financial Capital
What can a market be
A market can be a physical place, like a shop or it can be a virtual place, such a website on the Internet. As technology has improved, markets have changed and some have become more specialised.
What is a wholesale market
Wholesalers purchase large quantities of goods from different manufacturers and suppliers. Customers visit the wholesaler and select the goods they want to purchase. The wholesaler re-packs the goods in smaller quantities for their customers. The wholesaler’s customers are usually small businesses called retailers.
What is a retail market?
Retailers can purchase goods directly from manufacturers or from wholesalers. They also buy goods in big quantities and re-sell them in much smaller quantities to their consumers. Retail stores include supermarkets, department stores, specialist stores such as boutiques and stores that sell sports clothing or equipment, as well as furniture and equipment shops.
What is a Farmers market
Farmer’s markets sell fruit, vegetables, meat and dairy products directly from the farmer to the local community.
What is a craft market
Craft markets offer various types of products that have been handmade, such as cakes, biscuits, clothing, shoes, bags and wooden toys.
What is a flea market
Flea markets offer a range of different products that people have obtained for re-sale, such as secondhand books; used goods such as crockery, kitchenware and furniture; secondhand clothes or factory rejects.
What is a service market
A service market is where a service, expertise, skill or experience is sold. For example, a lawyer sells his or her knowledge, skills and experience of the law to a client who needs this type of service. (office or shop)
What is a Factor market
A factor market is the place where the factors of production are bought and sold.
What are the 4 factors in a factor market
Capital:
money invested in business, manufacturing, buying and selling this factor market is called a ‘financial market
Labour:
• skilled, semi-skilled and unskilled workers
• people are paid to do a specific job
• people’s time, expertise and skills are paid for
• this factor market is called a ‘labour market’
Resources:
all raw materials and other resources a business needs in order to operate
Entrepeneurship:
entrepreneurs are needed to start businesses using capital, purchase resources and pay for labour in order to produce goods or services to meet the needs and wants of their consumers
What is the labour market
The labour market is the place where the employer and employee come into contact. This is not a specific place. Employers advertise job vacancies in newspapers, magazines or on the Internet, or they pay an employment agency to find people to fill vacancies. People then apply for positions.
What is a financial market
A financial market is any type of financial transaction that helps a business grow or helps an investor to make money. There are two types of financial markets, namely capital and money markets.
What is a capital market
A capital market is where money, in the form of shares, is obtained to start large businesses. Members of the public share in a public company. The company uses the money to purchase assets and pay for labour and operating costs. The holders of these shares are called shareholders. The company only has contact with the shareholders at annual general meetings and when a dividend is distributed. . When the company starts to do well, other members of the public will want to purchase shares and so the price or value of these shares increases until a shareholder is prepared to sell all or some of their shares.
What is a money market
A money market is a place where a business can obtain cash or credit. This can take the form of a loan from a bank, credit from a supplier or a bank overdraft.
