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 it is not essential for living

Question 4

Economic problem

Answer 4

Unlimited wants cannot be met because there are limited factors of production. This creates 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 those tasks

Question 10

Consumer goods

Answer 10

Products which are sold 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 processes 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 both the private and the public sectors

Question 18

Private sectors

Answer 18

The part of the economy that is owned and controlled by individuals and companies for profit

Question 19

Public sectors

Answer 19

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

Question 20

Entrepreneur

Answer 20

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

Question 21

Business plan

Answer 21

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 22

Revenue

Answer 22

The amount a business earns from the sale of its products

Question 23

Business start-up

Answer 23

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

Question 24

Sole trader

Answer 24

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

Question 25

Start-up capital

Answer 25

The finance needed when first setting up a business

Question 26

Partnership

Answer 26

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

Question 27

Unincorporated

Answer 27

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

Question 28

Unlimited liability

Answer 28

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

Question 29

Shareholder

Answer 29

A person or organisation who owns shares in a limited company

Question 30

Private limited company

Answer 30

Often a small to medium-sized company; owned by the shareholders who have limited liability. The company cannot sell its shares to the general public

Question 31

Public limited company

Answer 31

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

Question 32

Ordinary shareholders

Answer 32

The owners of a limited company

Question 33

Limited liability

Answer 33

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 34

Dividend

Answer 34

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

Question 35

Collateral

Answer 35

Non-current assets offered as security against borrowing

Question 36

Franchise

Answer 36

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

Question 37

Joint venture

Answer 37

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

Question 38

Public corporation

Answer 38

A business organisation that is owned and controlled by the state

Question 39

Objective

Answer 39

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

Question 40

Market share

Answer 40

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

Question 41

Corporate social responsibility (CSR)

Answer 41

Businesses taking responsibility for the impact their activities might have on society and the environment

Question 42

Pressure group

Answer 42

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

Question 43

Social enterprise

Answer 43

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

Question 44

Stakeholder

Answer 44

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