Knowlege Test 1

Question 1

MARKET

Answer 1

Where buyers and sellers exchange goods and services.

Question 2

BUSINESS

Answer 2

Exist in order to provide good and services to the public. These can operate in the public, private and third sectors.

Question 3

GOODS

Answer 3

Physical objects that a business sells to its customers.

Question 4

SERVICES

Answer 4

Non-physical products - activities that a business carries out for its customers.

Question 5

PRODUCTS

Answer 5

Goods and services.

Question 6

CONSUMER DURABLES

Answer 6

Goods that last for several years and are used large number of times.

Question 7

SINGLE USE GOODS

Answer 7

Goods or services that are only used once.

Question 8

NEEDS

Answer 8

They are essential for survival - food, water, shelter, clothing and warmth.

Question 9

WANTS

Answer 9

They are not essential but we like to have them.

Question 10

ENTREPRENEUR

Answer 10

Someone who’s willing to take the risk of setting up their own business.

Question 11

ENTERPRISE

Answer 11

The willingness to take risks, show initiative and take on new ventures.

Question 12

PUBLIC SECTOR

Answer 12

Organisations that are owned by The State and run by The Government.

Question 13

PRIVATE SECTOR

Answer 13

Organisations that are not owned by The State, including sole traders, partnerships and limited companies.

Question 14

THIRD SECTOR

Answer 14

The past of an economy compromising non-governmental and non-profit-making organisation including charities, voluntary and community groups.

Question 15

PRIVATISATION

Answer 15

The process of selling a public sector organisation to the private sector by changing it into a public limited company.

Question 16

ADVANTAGES OF PRIVATISATION

Answer 16

• Government can raise income from the sale - potentially leading to lower taxation.
• Private sector involvement is likely to improve efficiency and therefore improve service for customers.

Question 17

DISADVANTAGES

Answer 17

• Missing markets - if the privatised organisation fails the public then lose the service.
• Higher prices - consumers incur higher prices as the service/product is no longer subsided by the government.

Question 18

PRIMARY SECTOR

Answer 18

All activities that obtain natural resources - e.g. farming, fishing, forestry and obtaining water.

Question 19

SECONDARY SECTOR

Answer 19

All manufacturing and construction activities that create finished goods.

Question 20

TERTIARY SECTOR

Answer 20

Selling finished goods and providing services.

Question 21

CHAIN OF PRODUCTION

Answer 21

The stages through which a product passes before being sold to a consumer.

Question 22

ADVANTAGES OF OWNING A BUSINESS AT EACH STAGE

Answer 22

• Reliant on themselves - means the final product is likely to be a higher quality and the service is likely more efficient.
• Economies of scale - unit cost reduction as the business grows.As the business is more efficient its unit cost (cost to make one product) falls.

Question 23

DISADVANTAGES OF OWNING A BUSINESS AT EACH STAGE

Answer 23

• High mounts of capital needed to takeover or set up business in each stage of production.
• Increased competition from firms in different stages of the production process.