Unit 1: Key Words Flashcards
Define need
a good or a service essential for living
Define want
a good or service which people would like to have but not essential for living. people’s wants are unlimited.
Define the economic problem
unlimited wants exist but there are limited resourses to produce the goods and services to satisfy those wants. this creates scarcity.
Define the factors of production
the resources needed to produce goods or services. there are 4 factors of production and are in limited supply. Land, Labour, Capital and Enterprise.
Define Scarcity
the lack of sufficient products to fulfill the total wants of the population
Define opportunity cost
the next best alternative given up by choosing another item
Define specialisation
when people and businesses concentrate on what they are best at.
Define division of labour
when the production process is split up into different tasks and each worker performs one of these tasks. it is a form of specialisation.
Define businesses
businesses combine factors of production to make products (goods and services) which satisfy peoples wants
Define added value
the different between selling price of a product and the cost of bought-in materials and components
Define primary sector
the primary sectors of industry extracts and uses the natural resources of earth to produce raw materials used by other businesses.
Define the secondary sector
the secondary sector of industry manufactures goods using the raw materials provided by the primary sector
Define the tertiary sector
the tertiary sector provides services to consumers and other sectors of the industry
Define de-industrialisation
when there is a decline in the importance of the secondary, manufacturing sector of industry in a country
Define mixed economy
has both a private sector and a public (state) sector
Define capital
the money invested into a business by the owners
Define entrepreneur
a person who organises, operates, and takes the risk for a new business venture
Define business plan
a document containing the business objectives and important details about the operations, finance and owners of the new business.
Define capital employed
the total value of the capital used in the business
Define internal growth
when a business expands into existing operations
Define external growth
when a business takes over or merges with another business. it is often called integration as one business integrates into another one.
Define takeover
when one business buys out the owners of another business which then becomes part of the ‘predator’ business (the business which has taken it over)
Define merger
when the owners of 2 businesses agree to join their business together to make one business
Define horizontal integration
when one business merges with or takes over another business in the same industry at the same stage of production
Define vertical integration
when one business merges with or takes over another one in the same industry but at a different stage of production. vertical integration can be forward or backward.
Define conglomerate integration/diversification
when a business merges with or takes over a business in a completely different industry. also known as diversification
Define sole trader
a business owned by one person
Define limited liability
the liability of shareholders in a company is limited to only the amount they invested
Define unlimited liability
the owners of a business can be held responsible for the debts of the business they own. their liability is not limited to the investment they made in the business.
Define partnership
a form of business in which two or more people agree to jointly own a business
Define partnership agreement
the written and legal agreement between business partners. it is not essential for partners to have such agreement but it is always recommended
Define an unincorporated business
a business that does not have a separate legal identity. sole traders and partnerships are unincorporated businesses.
Define incorporated businesses
companies that have separate legal status from their owners.
Define shareholders
the owners of a limited company. they buy shares which represent part-ownership of the company
Define private-limited companies
businesses owned by shareholders but they cannot sell shares to the public
Define public limited companies
businesses owned by shareholders but they can sell shares to the public and their shares are tradeable on the stock exchange
Define annual general meeting
a legal requirement for all companies. shareholders may attend and vote on who they want to be on the board of directors for the coming year.
Define dividends
payments made to shareholders from the profits (after tax) of a company. they are the return to shareholders for investing in the company.
Define franchise
a business based upon the use of brand names and promotional logos and trading methods of an existing successful business. the franchisee buys the license to operate this business from the franchisor.
Define joint venture
where two or more businesses start a new project together, sharing capital, risks and profits.
Define public corporation
a business in the public sector that is owned and controlled by the state (government)
Define business objectives
aims or targets that a business works towards.
Define profit
a total income of a business (revenue) less total costs
Define market share
the percentage of total market sales held by one brand or business
Define social enterprise
a business with social objectives as well as an aim to make a profit to reinvest back into the business.
Define stakeholder
any person or group with a direct interest in the performance and activities of a business
