Types of Business and Economic Systems Flashcards
What is an economy ?
An economy is the state of a country in terms of the production and consumption of goods and services and the supply of money.
What is a budget ?
A budget is a plan on how you save and spend your money.
What is the public sector ?
The public sector is a segment of the economy that is owned by the government which main purpose is to provide public service for the citizens.
What is the private sector ?
The public sector is a segment of the economy that is owned and controlled by private individuals.
What is nationalization ?
Nationalization is when a private company is taken into public ownership by the government.
Disadvantages of public sector ?
1.Difficult to manage
2.Political interference
3.Missuse of power
4.Consumer interest ignored
5.Favouritism may affect services and job allocation
Advantages of public sector ?
1.Easier planning and coordination
2.Protection of public interest
3.Quicker decision
4.Provide services which are needed but not profitable
5.Voter can remove government
Advantages of the private sector ?
1.Don’t require taxes to be fund
2.Entrepreneurs create jobs that are needed
3.Profit incentives to be efficient
4.Focus on efficiency
Disadvantages of the private sector ?
1.Limited capital
2.Limited access to credit
3.Personal liability or responsibility
4.Lack of professional advice
Why should a country have state ownership of certain organisations ?
To have certain services provided at a reasonable price.
What is privatisation ?
Privatisation is when a government owned business is passed on to private ownership.
What is specialization ?
Specialization is he process of becoming expert in a particular subject or skill.
What is a enterprise ?
Enterprise is a a business or company.
What is trade ?
Trade is the action buying of selling goods and services
What is globalisation ?
Globalisation is the exchange of information, technologies ,cultural practices and goods and services globally.
What is Sole trader ?
A sole trader is an individual who own his/her own business.
Advantages if sole trader ?
1.Easy to establish a business
2.Few paper work requirements
3.Owner can make decisions alone
4.Owner takes all the profit
Disadvantages of sole trader ?
1.Unlimited liability for debts
2.Owner responsible for damage caused
3.Difficult to raise finance
4.Difficult for owner to take time away
What is a partnership ?
A group of more than two people who owns and operate a business.
Advantages of partnership ?
1.Easy formation
2.Larger resources
3.Sharing risk
4.Has limited liability for debts
Disadvantages of partnership ?
1.Unlimited liability for debts
2.Disagreement may be hard to resolve
3.Dishonest partner endangers the business
4.In a large partnership communication becomes difficult
What is a limited liability company
(Ltd) Limited liability company means that the shareholders are not personally liable for the company’s debt.(In event of it becoming bankrupt a shareholder’s loss would only be the amount they invest in shares for in the company.
What is a shareholder/stockholder ?
Is a person, company or institution that owns at least one share of a company’s stock known as equity.
What are dividends ?
Is the distribution of some of a company’s earnings to a class of its shareholders
What is a public limited liability company ?
(PLC) Are allowed to sell their shares publicly.
Advantages of public limited liability ?
1.Greater access to capital
2.Shares are transferable
3.Shareholders have limited liability
4.Shares are transferable
5.Easy to buy and sell shares
Disadvantages of public limited liability ?
1.Expensive to set up
2.Decision making can be slow
3.May get too large causing diseconomies of scale.
4.More complex accounting and reporting requirements
What is a private limited liability company ?
(Ltd) A private limited liability company can not sell shares on stock exchange but sell share privately)
Advantages of private limited liability ?
1.More people to invest capital
2.Liablity is limited
3.Freedom and control
4.Separte legal entity
5.Responsibility is shared
Disadvantages of private limited liability ?
1.Limited Capital
2.Personal liability/Responsibility
3.Limited access to credit
4.Profits shared between more people
What is a company ?
A legal entity that is separate and distinct from its owner.(Most are profit making entities)
Advantages of a company ?
1.Limited Liability
2.Shares can be bought and sold
3.Professional managers run day-to-day business
4.Company may own property and borrow money
Disadvantages of a company ?
1.Lawyers are not allowed to operate as a company
2.Mangers may make decisions shareholders do not approve of.
3.Some cost in setting up a company.
What is a franchise ?
A franchise is a business whereby the owner licenses its operations—along with its products, branding, and knowledge in return for money.
Advantages of a franchise ?
1.Can use international brand
2.Start up is fast
3.Receives advice and training
4.The franchisor can get new markets
5.Gain from franchisee’s local knowledge and hard work
Disadvantages of a franchise ?
1.Regular payments for franchisor
2.Franchise loses some independence in running business
3.If run badly the brand will suffer
4.May lose local variety and choice
What is a multi-national ?
A multi-national is a business operating internationally in more than one country although ownership is usually based in one country.
Advantages of multi-national ?
1.Cheaper Labour
2.Job creation
3.Reduce unemployment
4.Tax cuts
5.Broader market base
Disadvantages of multinationals ?
1.Threat to local business
2.Loss of jobs
3.Poses a threat to the natural resources of a host country.
4.Exploitation of labour force as multi-nationals mostly hired labours at cheap rates in host countries.
What is a cooperative ?
Is a form of business organization that are owned and controlled by groups with special interest and common goal
Advantages of co-operative ?
1.Profits are shared
2.Managers are elected
3.Fair trade
4.Good quality products
5.Limited liability for shareholders
Disadvantages of co-operatives ?
1.Some co-operatives are not well managed
2.Saver risk losing funds if credit union collapses
3.Can be difficult to raise additional capital
The (7) Seven co-operatives of principle
1.Voluntary Membership
2.Democratic member control
3.Member economic participation
4.Autonomy and Independence
6.Education,training and information
7.Concern for community
What are the 4 economic systems ?
1.Subsistence/Traditional
2.Mixed Economy
3.Command economic system
4.Free Market economy
What is a subsistence or traditional economic system ?
A subsistence economy is one where there is little specialisation of labour and little trade.
Advantages of subsistence economy ?
1.Cheap and cost effective
2.Everyone knows their role
3.Each member has specific and pronounced role.
4.Close knit and socially satisfied.
Disadvantages of subsistence economy ?
1.Lack of access to technology
2.Low standard of living
3.Discourages new ideas
4.Lack of access to advance medicines
What is a Mixed economic or dual company system ?
A mixed economy is a combination of elements of a free and controlled economy. The production and supply are shared by the public and private sector.
Advantages of mixed economy ?
1.Less government intervention than a command economy
2.It encourages private initiative
3.It ensures economic development
4.It ensures job security
Disadvantages of mixed economy ?
1.More emphasis on profit at expense of the welfare of citizens
2.Wealth is not equally distributed
3.High levels of corruption
What is a command economic system ?
A command/controlled/socialist economy is an economy where all the economic descisions are made by the government.
Advantages of command economy ?
1.Eliminates wasteful competition
2.Provide and services that private enterprise would be unwilling to provide
3.Not possible for private monopoly
Disadvantages of a command economy ?
1.Free market and competition are discouraged
2.Creativity and efficiency are not encouraged
3.Non-productive government officials are required to admister the system
What is a free/capitalist market economy ?
A free market economy is little or no government interference in the economy.(It is based on private ownership)
Advantages of free market economy ?
1.Free competition stimulates innovation and keeps price down
2.Consumers decided what will be priduced by influencing market forces
3.Advertising can be used to create an artificially high demands for product
Disadvantanges of a free market ?
1.Encourages inequalities of wealth
2.Advertising can be used to create an artificially high demand for products
3.Companies may be tempted to restrict supplies to keep prices artifically high.
