Types of businesses Part 2 Flashcards
What does the law of demand state?
As the price of a good or service decreases, the quantity demanded increases. As the price increases, the quantity demanded decreases.
What does the demand curve represent?
The demand curve graphically represents the law of demand.
What is plotted on the vertical and horizontal axes of the demand curve?
Price on the vertical axis and quantity on the horizontal axis.
What does the law of supply state?
As the price of a good or service increases, the quantity supplied increases. As the price decreases, the quantity supplied decreases.
What does the supply curve represent?
The supply curve graphically represents the law of supply.
What is plotted on the vertical and horizontal axes of the supply curve?
Price on the vertical axis and quantity on the horizontal axis.
What is equilibrium in the context of supply and demand?
The point at which the supply and demand curves intersect.
What is the equilibrium price?
The price at which demand and supply intersect (P1).
What is the equilibrium quantity?
The quantity at which demand and supply intersect (Q1).
What occurs during a movement in demand or supply?
Occurs when there is a change in the price of the particular good or service.
What is a shift in demand or supply?
Occurs when there is a change in demand or supply due to factors other than the price of the good or service.
List some causes that can lead to a shift in demand.
- Changes in consumer income
- Preferences of consumers
- Prices of related goods
- Future expectations of buyers
List some causes that can lead to a shift in supply.
- Changes in production costs
- Technological advancements
- Future expectations of sellers
- Natural events/disasters
What direction does a contraction in demand indicate?
Decrease in quantity demanded.
What direction does an expansion in supply indicate?
Increase in quantity supplied.
What is a sole trader?
Owned and managed by one individual who receives all the profits and deals with all the losses.
What is one advantage of being a sole trader?
Easy to start.
What is one disadvantage of being a sole trader?
Unlimited liability.
What is a partnership?
A business owned by two or more people with all members sharing the decision-making process.
What must be established to start a partnership?
A partnership agreement detailing each partner’s responsibilities.
List two advantages of partnerships.
- Easier to raise financial capital
- Diversity of skills within the partnership
List two disadvantages of partnerships.
- Not a separate legal entity
- Potential for disputes over profit sharing
What is a corporation?
A complex business structure with many owners called shareholders.
What is one major advantage of corporations?
Limited liability.
What is one disadvantage of corporations?
Increased taxation (pays corporate income taxes).
What is a cooperative?
Made up of at least 5 members who contribute to the running of the business.
What is a franchise?
A contractual agreement to use the name and sell the products or services of a company in a designated geographic area.
Fill in the blank: The five business structures are _______.
[Sole trader, Partnerships, Corporations, Cooperatives, Franchises]
