Section 1 Purpose of Business Activity Flashcards
NEED
A good or service essential for living
WANT
A good or service that people would like to have, but is not required for living
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
Resources needed to produce goods or services
SCARCITY
A situation that exists when there are unlimited wants and limited resources to produce the goods and services to satisfy those wants.
OPPORTUNITY COST
The next best alternative after choosing another item
LAND
The natural resources that can be obtained from nature
LABOUR
The physical and mental efforts put in by the workers in the production process. The reward for labour is wage/salary
CAPITAL
The finance, machinery, and equipment needed for the production of goods & services
ENTERPRISE
The risk-taking ability of the person who brings the other factors of production together to produce a good or service. The reward is profit from the business
SPECIALIZATION
When a person or organization concentrates on a task which they are best at
DIVISION OF LABOUR
The production process is split up into different tasks and each worker performs one of these tasks. It is a form of specialization.
BUSINESS
Any organization that uses all the factors of production (resources) to create goods and services to satisfy human wants & needs
ADDED VALUE
The difference between the cost of materials bought in and the selling price of the product
PRIMARY SECTOR
The use/extraction of natural resources
SECONDARY SECTOR
The manufacture of goods using the resources from the primary sector
TERTIARY SECTOR
All the services provided in an economy
INDUSTRIALIZATION
A country moving from the primary sector to the secondary sector
DE-INDUSTRIALIZATION
A country moving from the secondary to the tertiary sector
MIXED ECONOMY
Has both a private and a public sector
CAPITAL
The money invested into a business by the owners
PRIVATE SECTOR
Private individuals own and run business ventures
PUBLIC SECTOR
The government owns and runs business ventures.
ENTREPRENEUR
A person who organizes, operates and takes risks for a new business venture
BUSINESS PLAN
A document containing the business objectives and important details about the operations, finance and owners of the new business.
CAPITAL EMPLOYED
The total value of capital used in the business
INTERNAL GROWTH
When a business expands its existing operations
EXTERNAL GROWTH / INTEGRATION
When a business takes over or merges with another business
MERGER
When the owner of two business agree to join their firms together to make one business
TAKEOVER
When one business buys out the owners of another business, which then becomes part of the ‘predator’ business
HORIZONTAL INTEGRATION
When one firm merges with or takes over another one in the same industry at the same stage of production
VERTICAL INTEGRATION
When one firm merges or takes over another firm in the same industry but ` a different stage of production
CONGLOMERATE INTEGRATION
When one firm merges with or takes over a firm in a completely different industry. This is also known as diversification
SOLE TRADER
A business organization owned and controlled by one person. Sole traders can employ other workers, but only he/she invests and owns the business.
LIMITED LIABILITY
The liability of the shareholders in a company is limited to only the amount they invested
UNLIMITED LIABILITY
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
A form of business in which two or more people agree to jointly own a business
PARTNERSHIP AGREEMENT
A legal agreement between two or more (usually up to twenty) people to own, finance and a run a business jointly and to share all profits.
UNINCORPORATED BUSINESS
A business that does not have a separate legal identity. Sole traders and partnerships are unincorporated businesses.
PRIVATE LIMITED COMPANIES
One or more owners who can sell its shares to only the people known by the existing shareholders
PUBLIC LIMITED COMPANIES
Two or more owners who can sell its shares to any individual/organization in the general public through stock exchanges
FRANCHISES
The owner of a business (the franchisor) grants a license to another person or business (the franchisee) to use their business idea
JOINT VENTURE
An agreement between two or more businesses to work together on a project
STAKEHOLDERS
Any person or group that is interested in or directly affected by the performance or activities of a business
