Unit 1 Understanding Business activity Flashcards
What is a need product?
A good of or service essential for living
What is a want product?
A good or service which people would like to have but which is not essential for living.
What is the economical problem?
There exist unlimited wants but limited resources to produce the goods and services to satisfy those wants. This creates scarcity
Factoes of production
Resources needed to produce goods and services. THere are four factors (Land, Labour, Capital, Enterprise) of production and they are in limited supply
What is scarcity?
the lack of sufficient products to fulfil the total wants of the population
What is opportunity cost?
the next best alternative given up by choosing another item
What is specialisation?
Wheb people and businesses concentrate on what they are best at
What is division of labour?
WHen the production process is split into different tasks and each worker preforms one of these tasks. It is a form of specialisation
What are businesses?
Cobine factors of production to make products which satisfy people’s wants
What is added value?
The difference between the selling price of a product and the cost of bought in materials and components
What is the primary sector?
Is a sector of industry which extracts and utilises the natural resources of the earth to produce raw materials used by other businesses
What is the secondary sector?
A sector of industry which manufactures goods using the raw materials extracted by the primary sector
What is De-Industrilisation?
When there is a decline in the importance of the secondary, manufacturing sector of industry in a country.
What is a mixed economy?
A mixed economy has both a private sector and a public sector
What is the private sector?
Businesses not owned by the government. These businesses can make their own decisions about what to sell and for how much.
What is the public sector?
Businesses owned by the government/or state. The government makes the decisions about what to sell and for how much. Sometimes the goods and services are free and paid for by tax (e.g healthcare, education etc)
What is capital?
The mone invested into a busines by the pwners
What is an Entrepreneur?
A person who organises, operates and takes the risk for a new business venture
What is a business plan?
A document containing the buisness objectives and important details about the operations, finance and owners of the new business
What is capital employed?
the total value of capital used in the business
What is internal growth?
Occurs when a business expands its exitsting operations
What is external growth?
When a business takes over or merges with another business it is often called intergration
What is a merger?
When the owners of the two businesses agree to join their firms together to make one business
WHat is a takeover or aquisition?
When on ebusiness buys out the owners of another business wich then becomes part of the “predator” business
What is horizontal intergration?
When one firm merges with or takes over another one in the same industry at the same stage of production
What is Vertical intergration?
When on firm merges with or takes over another on in the same industry but not the same stage of production. Vertical intergation can be forward or backward
What is Conglomaerate intergration?
When one firm merges with or takes over a firm in a completely different industry. This also known as diversication
What is a sole trader?
A buisness owned by one person
What is limited liability?
When the liability of the shareholders in a company is limited to the amount they invested.
What is unlimited liability?
When the owner is responsible for the debt of their business. Ther liability is not limited to the investment te made in the business
What is a partnership?
Is a form of business in which two or more people agree to jointly own a business
What is a partnership agreement?
The written and legal agreement between business partners. It is not essential for partners to have such an agreement but it is always reccomended
What is an unincorporated business
One that does not seperate legal identity. Sole traders and partnership are unincorperated buisness
What is an incorporated business?
It is a compan that have seperate legal status from their owners
What are shareholders?
The owners of a limited company. They buy shares which represent part ownership of a company.
What is a private limited company?
A company that doesn’t float on the stock exchange. Stocks are privately given
What is a public limited company?
A company that floats on the stock exchange. Anyone can own it.
What is an AGM?
An anual general meeting is 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.
What are dividends?
Payment made to shareholders from the profits of a company. They are the return to shareholders for investing in the company.
What is a franchise?
A buisness based upon the use of the brand names, promotional logos and trading methods of an existing business. The franchise buys the licenceto operate this business from the fanchisor
What are Business objectives?
The aims or targets that business works towards
What is profit?
The total income of a buisness less total costs
What is a market share?
The proportion of total market sales achieved by one business
What is a soical enterprise?
Objectives as well as an aim to make a profit to reinvest back into the business
What is a stakeholder?
Any person with a direct interest in the preformance and activities of a business
What are the four factors of production?
Land, Labour, Capital, Enterpirse
What are the advantages and disadvantages of division of labour
Advantages - Increases effciency
Disadvantages - Workers might get bored (may decrease effciency), Production may be stopped
What happens when added value is not used?
Other costs can’t be paid for
No profit will be made
