Units Flashcards
Section1 Unit1
page 2 - 10
Need
Good or service essential for living
Want
A good or service which people would like to have, but which is not essential for living. People’s wants are unlimited.
Economic Problem
There exist unlimited wants but limited resources to produce the goods and services to satisfy those wants. This creates scarcity.
Factor of Production
Those resources needed to produce goods or services. There are four factors of production and they are in limited supply.
What are four factor of production?
Land: This term is used to cover all of the natural resources provided by nature and includes fields and forest, oil,gas,metals, and other mineral resources.
Labour: This is the number of people available to make products.
Capital: This is the finance, machinery and equipment needed for the manufacture of goods.
Enterprise: This is the skill and risk-taking ability of the person who brings the other resources or factor of production together to produce a good or service, for example, the owner of a business. These people are called entrepreneurs.
Scarcity
The lack of sufficient products to fulfill the total wants of the population
Opportunity Cost
The next best alternative given up by choosing another item.
Specialosation
Occurs when people and businesses concentrate on what they are best at.
Division of labour
When the production process is split up into different tasks and each worker perform one of these tasks. It is a form of specialization.
Businesses
combine factors of production to make products (goods and services) which satisfy people’s wants
Added value
The difference between the selling price of a product and the cost of bought-in materials and components.
Why is added value important?
Can pay other costs such as labor costs, management expenses and costs including advertising and power
May be able to make a profit if these other costs come to a total that is less than the added value
How could a business increase added value?
Increase selling price but keep the cost of materials the same
Reduce the cost of materials but keep the price the same
Section1 Unit4
page 35 - 50
What are several main forms of business organisation? (Include private and public sector)
Sole traders
Partnerships
Private limited companies
Public limited companies
Franchises
Joint Venture
Public companies
Sole Trader
A business owned by a person
State an advantage and disadvantage of being a sole trader?
e.g answer (other answers on the textbook page 36)
ADV: The owner doesn’t have to give or share the information about his business to anyone else - other than Tax Office.
DADV: The owner doesn’t have enough money to expand the business. since the source of finance is limited.
Limited Liability
The liability of shareholders in a company is limited to only the amount they invested.
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.
Partnership
A form of business in which two or more people agree to jointly own a business
State an advantage and disadvantage of being a partnership?
e.g answer (other answers on the textbook page 37-38)
ADV: The responsibility of running a business is shared, so it accesses to additional resources, diversify your portfolio, learn from each other, build trust and reputation, and enhance creativity and innovation.
DADV: The partners don’t have a limited liability, so if the business fails, then creditors still force partners to liquidate their assets to pay business debts.
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 recommended.
Unincorporated Business
It doesn’t have a separate legal identity. Sole traders and partnerships are unincorporated businesses.
Incorporated Businesses
The companies that have separate legal status from their owners.
Shareholders
The owners of a limited company. They buy shares which represent part-ownership of the company.
Private Limited Companies
Businesses owned by shareholders but they can’t sell shares to the public.
***State an advantage and disadvantage of being a private limited company?
e.g answer (other answers on the textbook page 39 - 40)
ADV:
DADV:
Public Limited Companies
Businesses owned by shareholders but they can sell shares to the public and their shares are tradeable on the Stock Exchange.
***State an advantage and disadvantage of being a public limited company?
e.g answer (other answers on the textbook page )
ADV:
DADV:
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.
Dividents
The payments made to shareholders from the profits (after tax) of a company. They are the return to shareholders for investing in the company.
For each of 4 business orgs. listed before…
a) Who carried a risk
b) Ownership
c) If there is a limited liability (Yes/No)
Soletrader: a)Carried by sole trader b)One person c)No
Partnership: a)Carried by all partners b)Several partners c)No
Private limited company a)Shareholders up to their original investment b)Shareholders - may be few or many but shares can’t be sold to the public c)Yes
Public limited company: a)Shareholders up to their original investment b)Shareholders - many(may be millions) c)Yes
Franchises
The business is based upon the use of the brand names, promotional logos and trading methods of an existing successful business. The franchisee buys the licence to operate this business from the franchisor.
***State an advantage and disadvantage of being a franchise to the ‘franchisor’?
e.g answer (other answers on the textbook page 46)
ADV:
DADV:
***State an advantage and disadvantage of being a franchise to the ‘franchisee’?
e.g answer (other answers on the textbook page 46)
ADV:
DADV:
Joint Ventures
It is where two or more businesses start a new project together, sharing capital, risks, and profits.
***State an advantage and disadvantage of being a joint venture?
e.g answer (other answers on the textbook page 47)
ADV:
DADV:
Public Corporation
A business in the public sector that is owned and controlled by the state (government).
Section1 Unit5
page 51 -
Business objectives
They are the aims or targets that a business works towards.
What are the different business abjectives
Business survival
Profit
Return to shareholders
Growth of the business
Market share
Service to the company
Profit
The income of a business (revenue) less total costs.
Market Share
The percentage of total market sales held by one brand or business
If the total value of sales in a market is $100 million in one year and Company A sold $20 million, then what is the market share of this company.
Market share %
= Company sales / Total market sales * 100
= $20 million / $100 million * 100
= 20%
Social Enterprise
Social Enterprise is operated by private individuals. It has social objectives as well as an aim to make a profit to reinvest back into the business.
Social Enterprise often set three objectives for their business. What are they?
Social: to provide jobs and support for disadvantaged groups in society, such as the disabled or homeless
Environment: to protect the environment
Financial: to make a profit to invest back into the social enterprise to expand the social work that it performs.
What are the main internal and external stakeholder groups?
Owners
Workers
Managers
Consumers
Government
The whole community
Banks
Stakeholder
Any person or group with a direct interest in the performance and activities of a business is a stakeholder.
