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IGCSE Business > Module 1 - Understanding Business Activity > Flashcards

Module 1 - Understanding Business Activity Flashcards

1
Q

Needs

A

goods or services that we need in order to live

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2
Q

Wants

A

goods or services which people would like to have but are not essential for living

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3
Q

The basic economic problem is ________ due to unlimited _____ but limited _________

A

scarcity, wants, resources

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4
Q

Scarcity

A

there are not enough products to fulfill the wants of the population

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5
Q

Resources (factors of production) - there are 4

A

Land, labour, capital and enterprise

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6
Q

Land

A

any natural resource used in production

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7
Q

Labour

A

mental and physical efforts of a human

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8
Q

Capital

A

man-made goods used in production

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9
Q

Enterprise

A

the risk-taking ability of an entrepreneur

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10
Q

Opportunity cost

A

the next best alternative given up by choosing another item

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11
Q

Specialisation

A

when people and businesses focus on what they are best at

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12
Q

Division of labour is …

A

when production is split in different tasks and each worker performs one of these tasks

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13
Q

Advantages of specialisation (4)

A

workers specialized in certain task, increases efficiency
less time is wasted from one workbench to another, more efficiency
increased efficiency and so output and may lead to economies of scale
workers become more skilled and experienced reducing mistakes

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14
Q

Disadvantages of specialisation (3)

A

bored workers may lead to decreased efficiency
if a worker is absent, others can’t do their work, decreased efficiency
employees rely on each other for production, productivity may fall

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15
Q

Purposes of business activity (2)

A

combine scarce factors of production to produce goods or services to satisfy people’s wants
employs people as workers and pays them wages to allow them to consume products

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16
Q

Added value

A

the difference between the selling price and the cost of bought-in raw materials and components
ADDED VALUE = SELLING PRICE - TOTAL COST

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17
Q

Added value is not the same as ______ because added value doesn’t include the cost of labour, transport, etc.

A

profit

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18
Q

Ways to increase added value (put simply)

A

increase selling price / decrease cost of materials / increase the worth of the product or service being produced (eg. brand image, features, packaging, quality, etc.)

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19
Q

3 sectors of business

A

Primary, secondary and tertiary

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20
Q

Primary sector

A

extraction of natural resources
eg. farming, fishing

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21
Q

Secondary sector

A

manufacturing and production of goods
eg. car manufacturer

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22
Q

Tertiary sector

A

provides services
eg. hairdressing, banking

23
Q

The relative importance of business sectors in an economy depends on 2 things:

A

the number of workers employed
value of output produced

24
Q

Deindustrialisation occurs when …

A

there is a decline in the importance of the secondary sector of business

25
Q

Causes of deindustrialisation (3)

A

depletion of primary resources in home country
cheaper goods by developing countries
ability to spend more income on services

26
Q

Mixed economies have both a _______ ______ and a ______ ______

A

private sector, public sector

27
Q

Private sector

A

businesses NOT owned by the government - will make own decisions on what and how to produce; the main aim is to make profit

28
Q

Public sector

A

businesses owned by the government - the government will decide what and how to produce; the main aim is to offer a service to customers (eg. healthcare, education, public transport, defence)

29
Q

Privatization

A

the selling of a public sector business to the private sector

30
Q

Privatization may occur as _______ ______ is more _________, ___________ and will be able to make good quality goods leading to higher profits

A

private sector, efficient, competitive

31
Q

A downside of privatization is that _______ sector businesses do not have ______ objectives, making their products ____________

A

private, social, unaffordable

32
Q

Entrepreneur

A

a person who organises, operates and takes risk to make the business better

33
Q

Characteristics of entrepreneurs (8)

A

Hard working, Risk Takers, Creative, Effective Communicators, Optimistic, Self-confident, Innovative, Independent

34
Q

Advantages of being an entrepreneur (5)

A

Independent - able to choose how to use time and employment
Able to put own ideas into practice
May become successful and very profitable if business grows
Able to make use of personal interests and skills
Profits to themselves - no need to share them with anyone

35
Q

Disadvantages of being an entrepreneur (5)

A

Expensive - have to invest their own savings into the business
Time consuming - searching for other sources of finance
Risky - many entrepreneurs’ businesses fail
Lack of knowledge and experience in starting and operating a business
Opportunity cost - not being paid to work for another business

36
Q

Who needs to know the size of the business? (5)

A

Investors, government, competitors, workers and bank

37
Q

Business plan

A

contains business objectives, important details about the operations, finance, and the owners

38
Q

Ways business plans assist entrepreneurs (2)

A

It helps gain finance - banks will ask for a business plan before agreeing to a loan or overdraft for the business
It forces the entrepreneur to plan ahead carefully - reduces the risk of the business failing

39
Q

Reasons why governments support business start-ups (4)

A

Reduce unemployment - new businesses create jobs
Increase competition - gives consumers more choice
Increase output - economy benefits from increased output
Can grow further and become large and important businesses - pay government more taxes

40
Q

Ways governments support entrepreneurs (4)

A

Business ideas and help - trainings by experienced business people
Finance - loans with low interest rates or grants
Allow entrepreneurs the use of research facilities
Provide grants to train employees to increase efficiency/productivity

41
Q

Measurements of business size (4)

A

Number of people employed
Value of output
Value of sales
Capital employed

42
Q

Limitation of measuring business size by number of people employed

A

Some businesses employ few people but produce high output values

43
Q

Limitation of measuring business size by value of output

A

High level of output does not mean business is big

44
Q

Limitation of measuring business size by value of sales

A

Different businesses sell different products (expensive and cheap)

45
Q

Limitation of measuring business size by capital employed

A

Some companies may use cheap labor giving high output with low-cost equipment

46
Q

Reasons for business growth (4)

A

Higher profits
More status for owners and managers
Can benefit from Economies of Scale (lower costs)
Larger share of its market, ‘big names’

47
Q

2 categories of business growth

A

Internal and external

48
Q

Internal growth

A

when the business expands its existing operations

49
Q

External growth

A

when the business takes over or merges with another business

50
Q

3 types of external growth

A

Horizontal integration, vertical integration, conglomerate merger`

51
Q

Horizontal integration (define + 2 benefits + 2 problems)

A

firm taking over/merging with another firm in the same industry
Benefits: economies of scale, higher market share
Problems: diseconomies of scale, difficulty controlling/managing

52
Q

Vertical integration (define + 2 benefits)

A

firm taking over/merging with another firm in same industry but different stage of production (forwards or backwards)
Benefits: profits by supplier/retailer are absorbed and personal attention is given

53
Q

Conglomerate merger (define + 2 benefits)

A

firm merging/taking over another firm in a different industry
Benefits: spread of risks and transfer of ideas

IGCSE Business (2 decks)

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