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Business IGCSE > Unit 1: Business Activity > Flashcards

Unit 1: Business Activity Flashcards

1
Q

Needs

A

goods or services that are required in order to live

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2
Q

Wants

A

goods or services that people would like to have but are not essential for living

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3
Q

Scarcity

A

Limited resources to meet unlimited wants

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4
Q

opportunity cost

A

the item we give up by choosing another item

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5
Q

specialisation(definition,2 advantages, 2 disadvantages)

A

businesses focus on what they are best at

+workers are specialised in certain task

+less time is wasted from one bench to the other

  • workers might beome bored
  • if worker is absent, no other worker can do their job
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6
Q

factors of production(purpose+factors)

A

purpose:to combine scarce factors of production to produce goods/services that satisfy people’s wants

land-resourcse provided by nature

labour-number of people that make the products

capital-finance& equipment needed to make products

enterprise-skill of the person that brings together the factors of production to make goods/services

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7
Q

added value(definition and equation)

A

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

added value=sellling price-total cost

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8
Q

how to increase added value(2)

A
  • Increase selling price but keep the costs the same

- Reduce cost but keep selling price the same

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9
Q

stages of production

A

primary: natural resources
secondary: converting natural resources into manufactured goods
tertiary: providing services to customer

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10
Q

public sector

A
  • owned by government

- government makes decisions on what and how to produce

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11
Q

private sector

A
  • not owned by government

- makes own decisions on what to produce

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12
Q

entrepreneur

A

person that operates, organises and takes risks in order to make the business better

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13
Q

entrepreneur’s qualities

A
  • hard working
  • effective communicator
  • risk taker
  • creative
  • self confident
  • innovative
  • independent
  • optimistic
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14
Q

entrepreneurship(4 advantages, 4 disadvantages)

A

+able to choose how to use time and money
+able to put own ideas into practice
+may become profitable
+able to use own interests& skills

  • has to put own money into business
  • many entrepreneurs fail
  • lost income from not being employee
  • lack of knowledge/experiejnce in starting a business
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15
Q

business plan

A

contains business objectives, details about operations, finance and owners

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16
Q

business plan advantages

A
  1. helps gain finance-banks ask for it before agreeing to loans
  2. forces the entrepreneur to plan ahead carefully-reduces risk of failure
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17
Q

WHY-do gov. support start-ups(4)

A
  1. reduces unemployment- new bs create jobs
  2. increases competition-gives customers more choices
  3. benefits economy-increased output
  4. can grow further-pays gov. more taxes
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18
Q

HOW-do gov. support start-ups(4)

A
  1. set-up support sessions
  2. lend loans at low interest rates
  3. offer grants for training employees
  4. allow entrepreneurs to use research facilities
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19
Q

measuring business size(means and disadvantage)

A
  1. by no of employees
    - some bs have few employees but high levels of output
  2. value of output
    - high level of output doesn’t mean a bs is big
  3. value of sales
    - diff types of bs sell diff types of products(expensive vs inexpensive)
  4. by total value of capital invested
    - some companies use cheaper labour and low cost equipment
20
Q

business growth benefits(4)

A
  • higher profits
  • more status for owners
  • can benefit from economies of scale
  • larger share of its market
21
Q

economies of scale(definition)

A

-factors that lead to a reduction of average costs as business grows

22
Q

5 types of economies of scale

A

PURCHASING- buying in bulk to get cheaper prices

MARKETING-bs can advertise their own products not pay for a diff business to advertise them

FINANCIAL-better interest rates

MANAGERIAL-big businesses can afford specialist managers

TECHNICAL- can afford specialists to do more tasks(less staff)

23
Q

internal growth

A

-business expands its own operations

24
Q

external growth

A

business expands by taking over or merging with other businesses

25
Q

horizontal integration

A

firm merging with a firm in the same industry at the same stage of pruduction

26
Q

vertical integration(definition and 2 subgroups)

A

firm merging with a firm in the same industry but at different stages of production
FORWARDS- merging with a firm at a later state of production
BACKWARDS-merging with a firm at an earlier state of production

27
Q

diseconomies of scale

A

factors that lead to increase in average cost as business grows above a point

28
Q

3 types of diseconomies of scale

A
  • poor communication
  • lack of morale
  • slow decision making
29
Q

why some businesses stay small (3)

A
  • market size is small
  • type of industry
  • owners objectives
30
Q

why some businesses fail(5)

A
  • poor management-> lack of experience
  • failure to adapt to change
  • poor money management
  • over-expansion
  • competition
31
Q

business objectives

A

aims that a business works towards

32
Q

6 business objectives

A
  1. Increase in Market Share-good publicity
  2. generating profit-paying return to owners
  3. service to community-to provide jobs or support disadvantaged groups
  4. returns to shareholders-discourage them to sell shares
  5. business survival
  6. growth of business-benefit from economies of scale
33
Q

stakeholders

A
  • any person with direct interest in performance of business
  • internal(managers)
  • external(customers, government)
34
Q

internal stakeholders objectives

A
  • payments of profit

- business growth

35
Q

external stakeholders objectives(3 types)

A

government objectives:

  • money from taxes
  • increase countries output

customer objectives:

  • reliable products
  • value for money
  • good quality

bank objectives:
-make profit out of loans

36
Q

Sole-trader (definition, 4 advantages, 4 disadvantages)

A 
-business owned by just one person (can employ other people)
ADVANTAGES:
\+easy to set up
\+they are ther own boss
\+doesn't have to share profits
\+close relationship to customers

DISADVANTAGES

  • hard to get capital to expand
  • unlimited liability
  • likely to remain small
  • unincorporated(dies when owner dies)
37
Q

Partnership(definition, 4 advantages, 4 disadvantages)

A

-a business which 2-20 people agree to own
ADVANTAGES:
+easy to set up
+responsabilities are shared
+partners are motivated because any loss is shared
+more capital invested

DISADVANTAGES:

  • unincorporated
  • unlimited liability
  • losses are shared->if 1 is inefficient they all lose money
  • capital is provided by partners
38
Q

contents of partnership agreement

A
  • amount of capital invested
  • how long partnership lasts
  • arrangement for absences/retirements
  • the way profits are shared out
39
Q

businesses in the public sector

A
  • all bs owned by government
  • capital comes from taxes
  • most businesses have been nationalised(privqate business bought by gov)
  • e.g:schools, hospitals
40
Q

risk

A

uncertainty of profits or danger of loss, events that could cause businesses to fail

41
Q

franchise(definition, cost for franchisee)

A
  • agreement of a business based upon an existing business
  • franchisee pays an original amount and a percentage of profit
  • franchisor- main business
  • franchisee- individual to start-up franchise
42
Q

Joint Venture(definition,3 advantages, 3 disadvantages)

A 
-2 or more businesses agree to  start a prject together sharing risks, capital and profits
ADVANTAGES:
\+shared costs for expensive products
\+shared knowledge
\+shared risk

DISADVANTAGES:

  • profits are shared
  • might have disagreements
  • might have different methods of running a business
43
Q

Public Limited Company(share holders meeting, 2 advantages, 4 disadvantages)

A

-shareholders attend annual meeting to vote for board directors
ADVANTAGES:
+opportunity to raise high capital sums
+no restrictions of buying/selling shares

DISADVANTAGES:

  • difficult to set up
  • public accounts
  • selling shares in public is expansive
  • business can be taken over due to public shares
44
Q

Private Limited Company(4 advantages, 4 disadvantages)

A

ADVANTAGES:
+shares can be sold to more people=more capital
+company continues after shareholder dies
+all shareholders have limited liability
+owners are able to keep control of company

DISADVANTAGES:

  • difficult to set up
  • can’t offer share to the public
  • accounts are less secret than in other forms of business
  • shares are difficult to transfer
45
Q

incorporated business

A

business that has different legal status than business owners

46
Q

LTD: article of association and memorandum of association

A

article of association:rules under which the busin ess will be managed
memorandum of association:
-company name and adress
-what the business does

Business IGCSE (5 decks)

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