T1 - Enterprise, Business and the Economy

Question 1

Entrepreneur

Answer 1

Has idea and starts business or assembles relevant resources, understands business
Makes decisions (carry risk when expanding, ‘be first or be best’)
May offload management roles for productive efficiency

Question 2

Creative destruction

Answer 2

Innovation makes old products obsolete and removed from market in long run
New business may enter relying on innovated or differentiated ideas (disruptors)
Economic growth and standards of living increase

Question 3

Adding value

Answer 3

Crucial for profit, difference between cost of inputs and value or finished product

Question 4

Why is it important to cover costs and make profit in long run?

Answer 4

Debts and losses cause business to fail, safety net if unintended costs arise

Question 5

Costs of production

Answer 5

All payments to get product to marketplace (wages, premises, input costs)

Question 6

Profit =

Answer 6

Total sales revenue - Total costs

Question 7

Sales revenue =

Answer 7

Price x quantity sold

Question 8

Investment

Answer 8

Spend now for future returns/income

Question 9

Incentives

Answer 9

Rewards that get people to act a certain way, usually financial

Question 10

What can new tech lead to?

Answer 10

Creation or supply of new products or production of current ones more efficiently, reduce costs

Question 11

What is the main incentive to start a business?

Answer 11

All profits go to owner(s)

Question 12

NON-PROFIT motives for entrepreneur

Answer 12

Self-fufillment (sense of achievement, enjoyment)
Home working (cost efficient, especially for start up)
Social entrepreneurship (For social issues, not for profit and may require grants or donations)
Ethical business (Treat stakeholders appropriately whilst making profit)

Question 13

Factors of Production

Answer 13

Essential inputs into production process, add the value (Land, Labour, Capital, Enterprise)

Question 14

Land

Answer 14

Natural resources found and exploited, space for business

Question 15

Labour

Answer 15

Biggest input, especially with personal services

Question 16

Capital

Answer 16

Productive equipment, machines, buildings and infrastructure, used repeatedly, more capital is key to increase incomes (technologically better)

Question 17

Enterprise

Answer 17

Organises economic activity and willingness to take risks

Question 18

Specialisation

Answer 18

Concentrating expertise in a particular field, skilled people produce more, output per person increase, standards of living improve, efficiency improves

Question 19

Division of Labour

Answer 19

Organising employees so individuals can specialise in one part of the production process, out put increase as they get better. More efficient allocation of Labour

Question 20

Efficiency

Answer 20

Using resources in most economical way, more outpet per person

Question 21

Positives of division of labour

Answer 21

Increases efficiency, output per person
Reduce LR costs (more profit)
Sense of achievement
LR benefits standard of living

Question 22

Negatives of division of labour

Answer 22

People get bored of same job, productivity declines
Create carelessness/mistakes
Training costs of refilling positions
Occupational immobility + Structural unemployment (reallocation of resources) if area fails