Section 1: understanding business activity

Question 1

need

Answer 1

good or service essential for living

Question 2

want

Answer 2

good or service which people would like to have but which is not essential for living.

Question 3

economic problem

Answer 3

unlimited wants but limited resources

Question 4

factors of production

Answer 4

resources such as land, labour, capital, and entrepreneur needed to produce goods and services.

Question 5

scarcity

Answer 5

lack of sufficient products to fulfill the total wants of the population.

Question 6

opportunity cost

Answer 6

next best alternative forgone

Question 7

specialization

Answer 7

when people and businesses concentrate on what they are best at

Question 8

division of labour

Answer 8

when the production process is split up into different tasks and each worker performs one of those tasks

Question 9

primary sector

Answer 9

extracts natural resources to produce raw materials

Question 9

added value

Answer 9

difference between the selling price and the cost of production

Question 9

secondary sector

Answer 9

uses raw materials to manufacture finished, or semi-finished goods

Question 9

tertiary sector

Answer 9

industry provides services to consumers and other sectors of industry.

Question 9

industrialization

Answer 9

the growing importance of secondary sector business activity, and the reduced importance of the primary sector of business activity

Question 10

de-industrialization

Answer 10

decline in the importance of the secondary manufacturing sector of industry in a country (and growing imp of tertiary sec)

Question 11

mixed economy

Answer 11

both a private sector and a public (state) sector

Question 11

capital

Answer 11

money invested into the business by the owners

Question 11

capital employed

Answer 11

total value of capital used in the business

Question 12

horizontal integration

Answer 12

same industry at the same stage of production

Question 13

vertical integration

Answer 13

same industry but at a different stage of production. (forward/backward)

Question 14

conglomerate integration

Answer 14

completely different industry

Question 15

sole trader

Answer 15

a business owned by one person, and has unlimited liability.

Question 16

Limited liability

Answer 16

liability of shareholders in a company is limited to only the amount they invested

Question 16

Unlimited liability

Answer 16

owners of a business can be held responsible for the debts of the business they own

Question 16

Partnership

Answer 16

form of business in which two or more people agree to own a business venture

Question 16

Unincorporated businesses

Answer 16

do not have a separate legal identity. (sole trader & partnership)

Question 17

incorporated businesses

Answer 17

companies that have separate legal status from their owners (rest is examples)