THE NATURE OF BUSINESS Flashcards
(a) What is an enterprise?
An enterprise refers to a
business firm. The term is often applied to a newly formed venture. Another view of the
term is that it is an undertaking, especially a bold or difficult one. e.g. Japs Chicken.
(b) What is entrepreneurship?
You must be careful here not to define the entrepreneur. Entrepreneurship is the process
or act of organizing resources and acceptance of risk and uncertainty with the ultimate
aim of profit. The entrepreneur is the person who organizes production and bears the
risks.
(c) define barter:
This refers to the direct exchange of goods and services for other goods and services.
Thus, goods can be exchanged for goods, services for services, or goods for services without money. For barter to take place, there must be a “double coincidence of wants” (the persons who are bartering must want the goods or services each other already
has) E.g. if a person wants to exchange 10 kgs of sugar to get a car tire, that person must
find someone who has an extra tire and wants to exchange (swap) it for sugar.
(d) define profit:
This is the excess of returns over expenses. It may also be defined as the positive that
results from selling goods and services for more than it costs to produce them. For
example, if it costs $8 to produce a pencil, and the pencil is sold for $12, the profit, which
is found by taking the cost price away from the selling price, is $4. (Profit = Selling Price
– Cost Price, where the Price is greater than the Cost Price). Profit is sometimes termed
net profit. Profit is the reward to the entrepreneur for organizing and bearing risks in a
successful business.
(e) define loss:
This term indicates that the cost of production is greater than the selling price. Hence, if a
pencil costs $8 to produce and then it can only be sold for $6, there is a loss of $2. (Loss
= Selling Price – Cost Price, where the Selling Price is less than the Cost price). When the
entrepreneur is not successful, he will reap losses rather than reaping profits as his reward.
(f) define trade
Trade refers to the exchange of goods and services directly (barter) or indirectly (using
money) whether internally (within the country) or internationally (among countries). E.g.
In Trinidad, wholesalers selling fruits and vegetables to market vendors.
define organization
This is often used as synonymous with the enterprise considered above. However, more
specifically, it refers to the administrative personnel or apparatus of a business. Thus, it
looks at the order or arrangement of the business. E.g Kentucky Fried Chicken (KFC)
what is economy
An economy or economic system refers to the way the scarce economic resources of a
country are managed. Therefore, the economy of Trinidad is the way Trinidad manages
its resources. There are three broad categories of the economy:
1) the free market economy.
2) the command economy.
3) the mixed economy.
define producer
A producer is one who makes goods and creates services using different quantities and
types of factors of production, i.e. land, labor, capital, entrepreneurship, and technology.
E.g. farmers (entrepreneurs) utilizing money (capital) to purchase land, fertilizers and
seeds to plant crops, to hire labor, and to harvest produce using the necessary equipment,
machinery (capital) and technology.
define consumer
A consumer may be defined as an individual or a group of individuals who utilize goods
and services for their own satisfaction. E.g. students purchasing Jansport school bags.
define exchange
This means to give one thing and receive another in its place, or to trade and thereby
change the ownership of goods and services. The exchange may be direct or indirect.
define goods
This refers to tangible items that one can see and touch. There are two main types of
goods; goods for consumers and goods for producers. E.g. vegetables
define services
This refers to intangible items. A service is a situation that consumers experience. There
are two types, direct or personal services, for example, teaching, and impersonal services
like insurance.
define market
While many persons define the market as a place where goods and services are bought and
sold, we should bear in mind that not all markets operate in specific places. Therefore, it
is more accurate to define a market as a situation in which buyers and sellers
communicate for the purpose of buying goods and services. There are four elements of a
market: buyer, seller, goods/services, and price.
define commodity
A commodity is a product, especially a good rather than a service. E.g. a notebook
