Unit 1: Key Words

Question 1

Define need

Answer 1

a good or a service essential for living

Question 2

Define want

Answer 2

a good or service which people would like to have but not essential for living. people’s wants are unlimited.

Question 3

Define the economic problem

Answer 3

unlimited wants exist but there are limited resourses to produce the goods and services to satisfy those wants. this creates scarcity.

Question 4

Define the factors of production

Answer 4

the resources needed to produce goods or services. there are 4 factors of production and are in limited supply. Land, Labour, Capital and Enterprise.

Question 5

Define Scarcity

Answer 5

the lack of sufficient products to fulfill the total wants of the population

Question 6

Define opportunity cost

Answer 6

the next best alternative given up by choosing another item

Question 7

Define specialisation

Answer 7

when people and businesses concentrate on what they are best at.

Question 8

Define division of labour

Answer 8

when the production process is split up into different tasks and each worker performs one of these tasks. it is a form of specialisation.

Question 9

Define businesses

Answer 9

businesses combine factors of production to make products (goods and services) which satisfy peoples wants

Question 10

Define added value

Answer 10

the different between selling price of a product and the cost of bought-in materials and components

Question 11

Define primary sector

Answer 11

the primary sectors of industry extracts and uses the natural resources of earth to produce raw materials used by other businesses.

Question 12

Define the secondary sector

Answer 12

the secondary sector of industry manufactures goods using the raw materials provided by the primary sector

Question 13

Define the tertiary sector

Answer 13

the tertiary sector provides services to consumers and other sectors of the industry

Question 14

Define de-industrialisation

Answer 14

when there is a decline in the importance of the secondary, manufacturing sector of industry in a country

Question 15

Define mixed economy

Answer 15

has both a private sector and a public (state) sector

Question 16

Define capital

Answer 16

the money invested into a business by the owners

Question 17

Define entrepreneur

Answer 17

a person who organises, operates, and takes the risk for a new business venture

Question 18

Define business plan

Answer 18

a document containing the business objectives and important details about the operations, finance and owners of the new business.

Question 19

Define capital employed

Answer 19

the total value of the capital used in the business

Question 20

Define internal growth

Answer 20

when a business expands into existing operations

Question 21

Define external growth

Answer 21

when a business takes over or merges with another business. it is often called integration as one business integrates into another one.

Question 22

Define takeover

Answer 22

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)

Question 23

Define merger

Answer 23

when the owners of 2 businesses agree to join their business together to make one business

Question 24

Define horizontal integration

Answer 24

when one business merges with or takes over another business in the same industry at the same stage of production

Question 25

Define vertical integration

Answer 25

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.

Question 26

Define conglomerate integration/diversification

Answer 26

when a business merges with or takes over a business in a completely different industry. also known as diversification

Question 27

Define sole trader

Answer 27

a business owned by one person

Question 28

Define limited liability

Answer 28

the liability of shareholders in a company is limited to only the amount they invested

Question 29

Define unlimited liability

Answer 29

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.

Question 30

Define partnership

Answer 30

a form of business in which two or more people agree to jointly own a business

Question 31

Define partnership agreement

Answer 31

the written and legal agreement between business partners. it is not essential for partners to have such agreement but it is always recommended

Question 32

Define an unincorporated business

Answer 32

a business that does not have a separate legal identity. sole traders and partnerships are unincorporated businesses.

Question 33

Define incorporated businesses

Answer 33

companies that have separate legal status from their owners.

Question 34

Define shareholders

Answer 34

the owners of a limited company. they buy shares which represent part-ownership of the company

Question 35

Define private-limited companies

Answer 35

businesses owned by shareholders but they cannot sell shares to the public

Question 36

Define public limited companies

Answer 36

businesses owned by shareholders but they can sell shares to the public and their shares are tradeable on the stock exchange

Question 37

Define annual general meeting

Answer 37

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.

Question 38

Define dividends

Answer 38

payments made to shareholders from the profits (after tax) of a company. they are the return to shareholders for investing in the company.

Question 39

Define franchise

Answer 39

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.

Question 40

Define joint venture

Answer 40

where two or more businesses start a new project together, sharing capital, risks and profits.

Question 41

Define public corporation

Answer 41

a business in the public sector that is owned and controlled by the state (government)

Question 42

Define business objectives

Answer 42

aims or targets that a business works towards.

Question 43

Define profit

Answer 43

a total income of a business (revenue) less total costs

Question 44

Define market share

Answer 44

the percentage of total market sales held by one brand or business

Question 45

Define social enterprise

Answer 45

a business with social objectives as well as an aim to make a profit to reinvest back into the business.

Question 46

Define stakeholder

Answer 46

any person or group with a direct interest in the performance and activities of a business