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Flashcards in Component 1 Deck (113):
1

Give 3 characteristics of a small firm?

Small market share, managed by owners, independent

2

What is the primary sector?

Businesses that extract natural resources that can be used to produce other goods

3

What is the secondary sector?

Businesses that turn raw materials into finished goods adding value in the process

4

What are SME’s?

Micro,small, medium sized eater employing less than 250 persons

5

Give 3 reasons why SME’s are important?

Create innovation, jobs and entrepreneurial spirit

6

Give 3 characteristics of a good business idea?

Solve a problem, anticipate demand, cost effective

7

What is opportunity cost?

The cost of a decision as measured by the benefits forgiven of the next best alternative

8

How do you calculate original value?

Current value / total percentage x 100

9

Give an example of a primary sector business?

Farming

10

What is the Tertiary Sector?

Businesses that provide services to individuals or other business

11

What is Market Mapping?

A technique that allows firms to identify any gaps in the market

12

What are the 2 definitions for enterprise?

A business, someone who shows initiative and risk

13

Give 3 internal and 3 external sources of finance?

Owners capital, retained profit, sale and leaseback

Overdrafts, loans, venture capitalists

14

What is Trade credit?

Buy now pay later

15

What happens if the sample size is too large?

Time consuming and expensive

16

What happens if the sample is too small?

It’s not representative of the target population

17

Give 3 objectives of market research?

Find if demand is increasing, test consumer response, discover needs of customers

18

What is a Quota sample?

Where a researcher is given specific characteristics

19

Give a + if quota sampling?

Representative of target market

20

What is Random Sampling?

Selecting random from a list

21

What is Market Research?

Gathering and analysing data

22

Give an example of a secondary and tertiary business?

Car manufacturer and bank

23

What is the Public Sector?

Sector of the economy owned and controlled by the government

24

What is the Private sector?

Sector of the economy owned by individuals or groups

25

Give 3 + and 3 - of a sole trader?

Cheap to set up, get all profits, control

Unlimited liability, limited sources of finance, limited special skills

26

Give 2 properties of a partnership?

Shared profits, run by 2 or more people

27

Give 3 + and - of a partnership?

Shares risks, special skills, more finance

Unlimited liability, trust becomes important, arguments in decision making

28

What are semi variable costs?

Ones that are fixed and variable

29

Give 2 examples of semi variable costs?

Labour and electricity

30

What is Contribution?

How much each item goes towards paying off costs

31

How do you calculate unit costs?

Price- vc per unit

32

What is an Aim?

Long term intentions of the business

33

What is an objective?

A goal or target a business strives to achieve to reach the aim

34

What is price elasticity of demand?

It measures the responsiveness of demand to a change in price

35

What does elasticity measure?

The extent to which demand will change

36

How to calculate price elasticity of demand?

Percentage change in quantity demanded // the percentage change in price

37

How to calculate percentage change?

Change// original x 100

38

What does price Inelastic mean for demand?

Very little change in demand when price is changed

39

What happens to demand for price elastic?

Demand is highly responsive to price changes

40

When a product is price inelastic, what should a firm do to increase revenue?

Increase price

41

When a product is price elastic, what should a firm do to increase revenue?

Decrease price

42

What are the values for price inelastic?

0-1

43

What are the values for price elastic?

1- infinity

44

How do you work out unit contribution?

Selling price- variable cost per unit

45

How do you work out total contribution?

Total revenue- total variable costs

46

How do you work out profit using contribution?

Total fixed costs // contribution

47

How do you work out break even?

Total fixed costs // contribution

48

How do you work out margin of safety?

Actual sales - break even point

49

What is income elasticity of demand?

The responsiveness of demand to a change in income

50

How to calculate income elasticity of demand?

Percentage in quantity demanded// percentage change in income

51

Give the 4 types of goods for income elasticity of demand?

Normal goods

Luxury goods

Necessities

Inferior goods

52

How does IED affect normal goods?

As income increases so does demand (positive)

53

How are luxury goods affected by IED?

Demand will grow at a faster rate than the increase in income (income elastic)

54

Give an example of a luxury good?

Bose headphones

55

How are inferior goods affected by IED?

When income goes up demand drops

56

Give an example of inferior goods?

Everyday value beans

57

What is a business plan?

A blueprint giving details of everything about a business

58

Give 3 components of a business plan?

Products/services made or sold

Cash flow forecasts/costs

Market research findings

59

Give 3 reasons why a business plan is important?

Sets out how they aim to achieve its objective

Plot process against a plan

Sets out resources for a business needs

60

Give 3 advantages of a business plan?

Allows businesses to borrow from banks

Can easily see if something is going wrong

Allows businesses to check progress

61

Give 3 weaknesses of a business plan?

Inaccuracies can lead to unachievable objectives

Opportunity cost

Time consuming

62

Give 2 sources of advice for entrepreneurs?

The princes trust

Business advisors

63

What are fixed costs?

Costs that aren’t affected by output or sales

64

What are variable costs?

Costs that vary in proportion to changes in the level of output

65

What is contribution useful for?

Seeing which product of service contributes more to the overall business

66

What is break even point?

Where total costs are equal to revenue at a certain sales level

67

Give 2 reasons why firms use break even analysis?

To calculate levels of sales to break even

See how changes in sales affects profit

68

What is the Margin of safety?

The gap between actual output and break even output

69

How do you calculate margin of safety?

Unit sales - actual break even

70

Give 2 strengths of a break even chart?

Useful for business plans

Shows what level of output is required for profit

71

Give 2 weakness of break even charts?

Variable costs change

Can be hard to calculate if you sell many products

72

What is the main aim of not for profit enterprises?

To solve societies problems

73

Give 2 types of not for profit organisations?

Charities
Voluntary organisations

74

What is a market ?

Where buyers and sellers meet

75

Give 3 types of markets?

Local

Global

National

76

What is a sample?

Group of people from the target market

77

Give 2 problems with market research?

Human nature

External influences

78

How to calculate market share?

Sales from one business// total market x 100

79

How do you calculate market growth?

Change//original x100

80

How to calculate market size?

Number of sales in whole market

81

How do you calculate original value?

Current value// 100 +/- the growth of decline

82

What are the 4 types of market structure?

Monopoly

Oligopoly

Monopolistic competition

Perfect

83

How many businesses operate in perfect competition?

A large number of businesses where none is big enough to influence the others

84

What goods are sold in perfect competition?

Homogenous products

85

Are there barriers to the market in perfect competition?

No

86

How many businesses operate in a monopoly market?

A single producer

87

Is monopoly a price maker or taker?

Maker

88

Are there barriers to the market in monopoly?

Yeah

89

What type of products do monopoly markets make?

Unique

90

How many businesses in an oligopoly market?

Only a few dominate the market

91

What are the products like in oligopolistic markets?

Strong brand identity and big differentiation

92

Are there barriers to entry in oligopoly markets?

Yes, with high start up costs

93

Give an example of an oligopoly business?

Tesco, Asda

94

How many businesses are in monopolistic markets?

A large number of small businesses in competition

95

What are the products like in monopolistic competition?

Similar, but differentiated from each other

96

What is brand identity like in monopolistic competition?

Weak

97

Are there barriers to entry in monopolistic competition?

A few

98

What percentage of market share is regarded monopoly power?

25%

99

Who investigates where monopoly power is being abused?

The competition and markets authority

100

What do cartels do?

They try to keep prices high while the business involved share the market between themselves

101

What is demand?

The amount of a product that consumers are willing and able to purchase at any given price in a given time period

102

What 2 things does the demand curve show?

The relationship between the price of a product and the quantity demanded

What will happen when there is a change in the price of a product

103

The higher the price......

The lower the demand

104

The lower the price.....

The higher the supply

105

What causes shifts in the demand curve?

When there is a change in a non price factor

106

Give 3 non price factors that cause a shift in the demand curve?

Changes in tastes

Changes in income

Changes in advertising

107

What is supply?

The quantity firms are willing to supply at each price

108

As the market price of a product increases.....

Produces will increase supply

109

Give 3 types of non price factors that affect supply?

Raw material prices

Changes in technology

Increase in labour productivity

110

What is an equilibrium?

Where the quantity demanded is equal to the quantity supplied

111

What is disequilibrium?

Where demand doesn’t meet supply

112

What is a surplus?

Where the price is set above the equilibrium, and supplier supply more than buyers want to buy

113

What is a shortage?

Where the price is set below the equilibrium, meaning more is demanded than suppliers have