Understanding business activity

Question 1

Business activity

Answer 1

The process of producing goods and services to satisfy consumer demand

Question 2

Need

Answer 2

A good or service which is essential to living

Question 3

Want

Answer 3

A good or service which people would like, but is not essential to living

Question 4

Economic problem

Answer 4

Unlimited wants cannot be met because there are limited factors of production. This create scarcity.

Question 5

Factors of production

Answer 5

The resources needed to produce goods and services - land, labour, capital and enterprise

Question 6

Scarcity

Answer 6

There are not enough goods and services to meet the wants of the population

Question 7

Opportunity cost

Answer 7

The benefit that could have been gained from an alternative use of the same resource

Question 8

Specialisation

Answer 8

People and businesses concentrate on what they are best at

Question 9

Division of labour

Answer 9

Production is divided into separate tasks and each employee does just one of these tasks

Question 10

Consumer goods

Answer 10

Products which are sold to the final consumer. They can be seen and touched, for example computers and food

Question 11

Consumer services

Answer 11

Non-tangible products such as insurance services, transport

Question 12

Capital goods

Answer 12

Physical goods, such as machinery and delivery vehicles, used by other businesses to help produce other goods and services

Question 13

Primary sector

Answer 13

Firms whose business activity involves the extraction of natural resources

Question 14

Secondary sector

Answer 14

Firms that process and manufacture goods from natural resources

Question 15

Tertiary sector

Answer 15

Firms that supply a service to consumers and other businesses

Question 16

Chain of production

Answer 16

The production and supply of goods to the final consumer involves activities from primary, secondary and tertiary sector businesses

Question 17

Mixed economy

Answer 17

An economy where the resources are owned and controlled by individuals and companies for profit

Question 18

Public sector

Answer 18

The part of the economy that is controlled by the state or governement

Question 19

Entrepreneur

Answer 19

An individual who has an idea for a new business and takes the financial risk of starting up and managing it

Question 20

Business plan

Answer 20

A detailed written document outlining the purpose and aims of a business which is often used to persuade lenders or investors to finance a business proposal

Question 21

Revenue

Answer 21

The amount a business earns from the sale of its products

Question 22

Business start-up

Answer 22

A newly formed business. They usually start small, but some might grow to become much bigger

Question 23

Sole trader

Answer 23

A business that is owned and controlled by just one person who takes all of the risks and receives all the profits

Question 24

Start-up capital

Answer 24

The finance needed when first setting up a business

Question 25

Partnership

Answer 25

A business formed by two or more people who will usually share responsibility for the day-to-day running of the business. Partners usually invest capital in the business and will share profits

Question 26

Unincorporated business

Answer 26

A business that does not have a legal identity seperate from its owners. The owners have unlimited liability for business debts

Question 27

Unlimited liability

Answer 27

If an unincorporated business fails, then the owners might have to use their personal wealth to finance any business debts

Question 28

Shareholder

Answer 28

A person or organisation who owns shares in a limited company

Question 29

Public limited company

Answer 29

Often a large company; owned by shareholders who have limited liability. The company can sell its shares to the general public

Question 30

Ordinary shareholders

Answer 30

The owners of a limited company

Question 31

Limited liability

Answer 31

The shareholders in a limited liability company which fails only risk losing the amount they have invested in the company and not any of their personal wealth

Question 32

Dividend

Answer 32

A payment, out of profits, to shareholders as a reward for their investment

Question 33

Collateral

Answer 33

Non-current assets offered as security against borrowing

Question 34

Franchise

Answer 34

A business system where entrepreneurs buy the right to use the name, logo and product of an existing business

Question 35

Joint venture

Answer 35

Two or more businesses agree to work together on a project and set up a seperate business for this purpose

Question 36

Public corporation

Answer 36

A business organisation that is owned and controlled by the state

Question 37

Objective

Answer 37

A statement of a specific target to be achieved. It should be SMART

Question 38

Market share

Answer 38

The revenue of a business expressed as a percentage of total market revenue

Question 39

Corporate social responisbility (CSR)

Answer 39

Businesses taking responsibility for the impact their activities may have on society and the environent

Question 40

Pressure group

Answer 40

A group of like-minded people that puts pressure on businesses and government to change their policies to reach a predermined objective

Question 41

Social enterprise

Answer 41

A business with social objectives that reinvests most of its profits back into the business or into benefiting society at large

Question 42

Stakeholder

Answer 42

An individual who has an interest in a business because they are affected by its activities and decisions