vocabulary Flashcards
need
a good or service essential for living
want
a good or service which people would like to have, but 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
factors of production
resources needed to produce goods or services. there are 4 factors of production and they are in limited supply. they are -> land, labour, capital, enterprise
scarcity
lack of sufficient products to fulfill the total wants of the population
opportunity cost
next best alternative given up by choosing another item (what you lose due to a decision)
specialisation
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 performs one of these tasks. it is a form of specialisation.
businesses
combine factors of production to make products (goods and services) which satisfy people’s wants
added value
difference between the selling price of a product and the cost of brought-in materials and components
primary sector
the primary sector of industry extracts and uses the natural resources of Earth to produce raw materials used by other businesses
secondary sector
the secondary sector of industry manufactures goods using the raw materials provided by the primary sector
tertiary sector
the tertiary sector of industry provides services to consumers and the other sectors of industry
de-industrialisation
occurs when there is a decline in the importance of the secondary, manufacturing sector of industry in a country
mixed economy
economy that has both a private sector and a public (state) sector
private sector
businesses not owned by the government
public sector
government/state owned and controlled businesses and organisations
capital
the money invested into a business by the owners
entrepreneur
a person who organises, operates, and takes the risk for a new business venture
business plan
a document containing the business objectives and important details about the operations, finance, and owners of the new business
capital employed
the total value of capital used in the business
internal growth
occurs when a business expands its existing operations
external growth
when a business takes over or merges with another business. it is often called integration as one business is integrated into another one
takeover / acquisition
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)
merger
when the owners of 2 businesses agree to join their businesses together to make 1 business
horizontal integration / merger
when one business merges with or takes over another business in the same industry at the same stage of production
vertical integration / merger
when one business merges with or takes over another business in the same industry but at a different stage of production. vertical integration can be forward or backward.
(forward is with later stage of production - closer to consumer like tertiary sectors. (primary -> secondary -> tertiary) backward is with a earlier stage of production - closer to raw material supplies like primary sectors (tertiary -> secondary -> primary))
conglomerate integration / diversification
when one business merges with or takes over a business in a completely different industry
sole trader
a business owned by 1 person
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 2 or more people agree to jointly own a business
partnership agreement
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
one that does not have a separate legal identity such as sole traders and partnerships
incorporated businesses
companies that have a separate legal status from their owners
sharehoders
owners of a limited company. they buy shares which represent part-ownership of the company
private limited companies
businesses owned by shareholders but they cannot sell shares to the public.
public limited companies
businesses owned by shareholders but they can sell shares to the public and their shares are tradeable on the Stock Exchange
annual general meeting
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
dividends
payments made to shareholders from the profits (after tax) of a company. they are the return to shareholders for investing in the company
franchise
business based upon the use of the brand names, promotional logos and trading methods of an existing successful business. The franchisee buys the license to operate this business from the franchisor (branches)
joint venture
where 2 or more businesses start a new project together, sharing capital, risks and profits
public corporation
business in the public sector that is owned and controlled by the state (government)
business objectives
aims or targets that a business works towards
profit
total income of a business (revenue) less total costs
market share
percentage of total market sales held by one brand or business
social enterprise
has social objectives as well as an aim to make a profit to reinvest back into the business
stakeholder
any person or group with a direct interest in and is directly affected by the performance and activities of a business
motivation
the reason why employees want to work hard and work effectively for the business
wage
payment for work, usually paid weekly
time rate
the amount paid to an employee for 1 hour of work
piece rate
amount paid for each unit of output
salary
payment for work, usually paid monthly
bonus
additional amount of payment above basic pay as a reward for good work
commission
payment relating to the number of sales made
profit sharing
a system whereby a proportion of the company’s profits is paid out to employees
job satisfaction
the enjoyment derived from feeling that you have done a good job
job rotation
involves workers swapping around and doing each specific task for only a limited time and then changing around again
job enrichment
involves looking at jobs and adding tasks that require more skill and/or responsibility
teamworking
involves using groups of workers and allocating specific tasks and responsibilities to them
training
the process of improving a worker’s skills
promotion
the advancement of an employee in an organisation, for example, to a higher job/managerial level
