Unit 1 Key Words Flashcards
Business activity
The process of producing goods and services to satisfy consumer demand.
Need
A good or service which is essential to living.
Want
A good or service which people like, but isn’t essential for living.
Economic problem
Unlimited wants can’t be met because there are limited factors of production. This creates scarcity.
Factors of production
The resources needed to produce goods and services - land, labour, capital and enterprise.
Scarcity
There are not enough goods and services to meet the wants of the population.
Opportunity cost
The benefit that could have been gained from an alternative use of the same resource.
Specialisation
People and businesses concentrate on what they are best at.
Division of labour
Production is divided into separate tasks and each employee does just one of those tasks.
Consumer goods
Products which are sold to the final consumer. They can be seen and touched, for example computers and food.
Consumer services
Non-tangible products such as insurance services, transport.
Capital goods
Physical goods, such as machinery and delivery vehicles, used by other businesses to help produce other goods and services.
Primary sector
Firms whose business activity involves the extraction of natural resources.
Secondary sector
Firms that process and manufacture goods from natural resources.
Tertiary sector
Firms that supply a service to consumers and other businesses.
Quaternary sector
The quaternary sector consists of those industries providing information services.
Chain of production
The production and supply of goods to the final consumer involves activities from primary, secondary and tertiary sector businesses.
Mixed economy
An economy where the resources are owned and controlled by both the private and public sectors.
Private sector
The part of the economy that is owned and controlled by individuals and companies for profit.
Public sector
The part of the economy that is controlled by the state or government.
Entrepreneur
An individual who has an idea for a new business and takes the financial risk of starting up and managing it.
Business Plan
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.
Revenue
The amount a business earns from the sale of its products.
Business start-up
A newly formed business. They usually start small, but some might grow to become much bigger.
Sole trader
A business that is owned and controlled by just one person who takes all of the risks and receives all of the profits.
Start-up capital
The finance needed when first setting up a business.
Partnership
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.
Unincorporated business
A business that does not have legal identity separate from its owners. The owners have unlimited liability for business debts.
Unlimited liability
If an unincorporated business fails, then the owners might have to use their personal wealth to finance any business debts.
Shareholder
A person or organisation who owns shares in a limited company.
Private limited company (Ltd)
Often a small to medium-sized company; owned by shareholders who have limited liability. The company can’t sell its shares to the general public.
Public limited company (plc)
Often a large company; owned by shareholders who have limited liability. The company can sell its shares to the general public.
Ordinary shareholders
The owners of a limited company.
Limited liability
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.
Dividend
A payment, out of profits, to shareholders as a reward for their investment.
Collateral
Non-current assets offered as security against borrowing.
Franchise
A business system where entrepreneurs buy the right to use the name, logo and product of an existing business.
Joint venture
Two or more businesses agree to work together on a project and set up a separate business for this purpose.
Public corporation
A business organisation that is owned and controlled by the state.
Objective
A statement of a specific target to be achieved. It should be SMART.
Market share
The revenue of a business expressed as a percentage of total market revenue.
Corporate social responsibility (CSR)
Businesses taking responsibility for the impact their activities might have on society and the environment.
Pressure group
A group of like-minded people that puts pressure on businesses and government to change their policies to reach a predetermined objective.
Social enterprise
A business with social objectives that reinvests most of its profits back into the business or into benefitting society at large.
Stakeholder
An individual or group which has an interest in a business because they’re affected by its activities and decisions.
Horizontal integration
Brings together two firms in the same industry who are also in the same sector of business activity.
Forward vertical integration
Brings together two firms in the same industry but one is the customer of the other.
Backward vertical integration
Brings together two firms in the same industry but one is the supplier of the other.
Conglomerate integration
The bringing together of two businesses who are in completely different industries.
