Understanding Business Flashcards
What is an Entrepreneur?
Someone who comes up with a business idea and takes risks to create a product or service to meet the needs/wants of consumers and make a profit.
Goods are ‘tangible’. What does this mean?
This means that they can be seen and touched
eg. Clothes, food
Services are ‘intangible’. What does this mean?
This means they can not be seen (as in a physical object) or touched
eg. Haircut, going to the cinema
What does it mean if something is ‘durable’?
It can be used more than once.
Eg. Clothing, mobile phone
State the 4 factors of production
Land, labour, capital and enterprise
A business will use these to create a product/ service to satisfy its customers.
What is land?
The natural resources (raw materials) that the business uses
Eg. Plot of land, coal, diamonds, wood, oil
What is labour?
The workforce of the business
Eg. HR, the employees
What is capital?
The man-made resources/assets of the business
Eg. Machinery, tools, finance
What is enterprise?
This is where the entrepreneur will combine land, labour and capital to achieve their business idea producing goods or services
What is GDP (Gross Domestic Product)?
The GDP of a country is the monetary value of all the finished goods and services produced within that country in a specific time
What is the economic activity in a business cycle?
The economic activity is the amount of production taking place. This tends to move up and down in a business cycle
What will happen when the country is experiencing a boom/upturn? (Business cycle)
- Employment rates will be high
- People have more disposable income to spend on luxuries
- Higher demand for products
- Higher demand = more labour, meaning higher employment rates
The country experiences ‘economic growth’
What will happen when a country is experiencing a slump/downturn? (Business cycle)
- Less disposable income
- Lower demand for products
- Businesses do not need as much labour as production levels will be low
- Businesses suffer as people cannot afford to spend their income on unneeded products
Leads to a recovery and the cycle continues
How is wealth created?
Wealth is created by businesses adding value to a product as it goes down the production line
What is the purpose of ‘support organisations’?
Support organisations are usually set up by national or local governments to offer businesses financial (funding) and non-financial (advice) support.
Eg. PSYBT (Princes Scottish Youth Business Trust)
What do ‘support organisations’ offer?
Non-financial:
- Legal advice
- Mentoring
- Financial advice
- Start-up advice
- Offices
Financial:
- Grants
- Soft loans (loans with low interest rates)
What are the Sectors Of Industry/Activity?
There are 3 main sectors of industry in which a company can operate:
- Primary
- Secondary
- Tertiary
What is the primary sector? (Sectors Of Industry)
The primary sector are businesses who are involved in extracting raw materials
Eg. Agriculture, mining, farming
What is the secondary sector? (Sectors Of Industry)
The secondary sector are businesses involved in manufacturing and construction
Eg. Baker, builder, car manufacturer
What is the tertiary sector? (Sectors Of Industry)
Businesses which provide a service
Eg. Fitness instructor, hotel, hairdresser, supermarket
What are the Sectors Of Economy?
The economy is divided into 3 sectors:
- Private
- Public
- Third
Within each sector of the economy there are different businesses with different aims/objectives
What is the private sector? (Sectors Of Economy)
Private sector organisations (such as supermarkets, shops) are owned and controlled by private individuals.
Their main aim is to make a profit.
The type of organisations that would be in the private sector are:
- Sole Trader
- Partnership
- Private Limited Company (ltd)
What is the public sector? (Sectors Of Economy)
Public sector organisations are owned and controlled by the Government and financed through taxes.
They aim to provide a service to the public.
Eg. NHS
What is the third (voluntary) sector? (Sectors Of Economy)
Types of organisations in the third sector include charities, voluntary organisations and social enterprises.
They aim to raise money/ increase awareness of a good cause.
Eg. Oxfam, local youth club
