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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
horizontal integration
firm merging with a firm in the same industry at the same stage of pruduction
26
vertical integration(definition and 2 subgroups)
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
diseconomies of scale
factors that lead to increase in average cost as business grows above a point
28
3 types of diseconomies of scale
- poor communication - lack of morale - slow decision making
29
why some businesses stay small (3)
- market size is small - type of industry - owners objectives
30
why some businesses fail(5)
- poor management-> lack of experience - failure to adapt to change - poor money management - over-expansion - competition
31
business objectives
aims that a business works towards
32
6 business objectives
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
stakeholders
- any person with direct interest in performance of business - internal(managers) - external(customers, government)
34
internal stakeholders objectives
- payments of profit | - business growth
35
external stakeholders objectives(3 types)
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
Sole-trader (definition, 4 advantages, 4 disadvantages)
``` -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
Partnership(definition, 4 advantages, 4 disadvantages)
-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
contents of partnership agreement
- amount of capital invested - how long partnership lasts - arrangement for absences/retirements - the way profits are shared out
39
businesses in the public sector
- all bs owned by government - capital comes from taxes - most businesses have been nationalised(privqate business bought by gov) - e.g:schools, hospitals
40
risk
uncertainty of profits or danger of loss, events that could cause businesses to fail
41
franchise(definition, cost for franchisee)
- 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
Joint Venture(definition,3 advantages, 3 disadvantages)
``` -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
Public Limited Company(share holders meeting, 2 advantages, 4 disadvantages)
-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
Private Limited Company(4 advantages, 4 disadvantages)
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
incorporated business
business that has different legal status than business owners
46
LTD: article of association and memorandum of association
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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