understanding business activity

Question 1

scarcity

Answer 1

there are not enough products to fulfil the wants of the population

Question 2

Opportunity cost

Answer 2

another alternative given up by choosing the next best alternative

Question 3

specialisation

Answer 3

people and a business focus on what they are best at

Question 4

division of labour

Answer 4

production is splint in different tasks and each worker performs one of these tasks

Question 5

factors of production CELL

Answer 5

-capital-the finance and equipment needed to make products
-enterprise-the skill of the person who brings other factors of production together to make goods
-land- all resources provided by nature
-labour - the no. of people to make the products

Question 5

how to increase added value

Answer 5

-increase the selling price of product and keep the total cost of materials the same
-decrease the total cost of materials and keep the selling price of the product the same

Question 6

added value

Answer 6

how much more a business sells a product for than the total cost of materials

added value= selling price-total cost

Question 7

mixed economy

Answer 7

primary- extracts an uses the natural resources to produce raw materials
-secondary-takes the raw materials and converts them into manufactured goods
-tertiary-n providing services to consumers and other sectors

Question 8

public sector

Answer 8

owned by the government, government will make decisions on what and how to produce

Question 8

private sector

Answer 8

businesses not owned by the government

Question 9

Entrepreneur

Answer 9

person who organises, operates and takes risk to make the business better
-hard working
-risk takers
-optimistic
-effective communicators
-self confident
-independant
-creative

Question 10

business plan

Answer 10

contains business objectives, important details about the operations finance and other owners

Question 11

Government support for startups

Answer 11

-reduce unemployment
-increase competition
-increase output
-grow further and increase GDP

Question 12

business size

Answer 12

-the number of people employed in the business
-the value of output of the business
-the value of sales
the total value of capital invested into the business

Question 13

marketing

Answer 13

Targeting a larger audience

Question 13

economies of scale

Answer 13

factors that lead to a reduction in average costs as a business. grows

Question 14

purchasing

Answer 14

when businesses buy in bulk so they get cheaper prices

Question 15

managerial

Answer 15

big businesses can afford specialist managers

Question 15

external growth

Answer 15

when the business takes over or merges with another business

Question 16

financial

Answer 16

bigger businesses get better interest rates from banks as they are less risk

Question 17

internal growth

Answer 17

when there business expands its existing operations

Question 18

types of external growth

Answer 18

-horizontal
-vertical
-conglomerate

Question 18

Vertical integration

Answer 18

firm taking over/merging with another firm in the same industry but different stage of production

Question 19

horizontal integration

Answer 19

-firm taking over/merging with another firm in the same industry

Question 19

Conglomerate merger

Answer 19

firm merging/taking over another firm in different industry AKA diversification

Question 20

sole trader

Answer 20

business owned by just one person
-no need for capital
-unlimited liability
-no one to discuss business matters
-unincorporated
-they are their own boss
-relationships w/ customers
-

Question 21

why business fails

Answer 21

-poor management
-failure to plan for change
-poor money management
-over-expansion
-competition

Question 22

why businesses grow

Answer 22

-higher profits
-more status for owners and managers
-can benefit from lower costs
-larger share of its market

Question 23

diseconomies of scale

Answer 23

-poor communication
-low morale
-slow decision making

Question 24

partnership

Answer 24

2 or more people
-requires a partnership agreement
-easy to set up
-more capital invested
-partners are motivated because any losses are shared by partners
-unlimited liability
-unincorporated ;partener dies partenership dies

Question 25

private limited company

Answer 25

• it can sell shares
  -incorporated
  -articles of association
  -memorandum of association

Question 26

public limited company

Answer 26

-shares can be sold to the public
-difficult to set up legal formalities
-dangers of being taken over due to public shares

Question 27

business objectives

Answer 27

-survival
-generating profit
-return shareholders
-growth of business
-market share
-service to community

Question 27

joint venture

Answer 27

two or more businesses start a project together sharing capital risk and profits
-profits are shared
-disagreements over important decisions
-risks are shared
-costs are shared

Question 28

franchise

Answer 28

agreement of a business based upon and existing brand

Question 28

stakeholder

Answer 28

-person with a direct interest in the performance of a business
-internal and external shareholders