Flashcards in Component 1 Deck (113):
Give 3 characteristics of a small firm?
Small market share, managed by owners, independent
What is the primary sector?
Businesses that extract natural resources that can be used to produce other goods
What is the secondary sector?
Businesses that turn raw materials into finished goods adding value in the process
What are SME’s?
Micro,small, medium sized eater employing less than 250 persons
Give 3 reasons why SME’s are important?
Create innovation, jobs and entrepreneurial spirit
Give 3 characteristics of a good business idea?
Solve a problem, anticipate demand, cost effective
What is opportunity cost?
The cost of a decision as measured by the benefits forgiven of the next best alternative
How do you calculate original value?
Current value / total percentage x 100
Give an example of a primary sector business?
What is the Tertiary Sector?
Businesses that provide services to individuals or other business
What is Market Mapping?
A technique that allows firms to identify any gaps in the market
What are the 2 definitions for enterprise?
A business, someone who shows initiative and risk
Give 3 internal and 3 external sources of finance?
Owners capital, retained profit, sale and leaseback
Overdrafts, loans, venture capitalists
What is Trade credit?
Buy now pay later
What happens if the sample size is too large?
Time consuming and expensive
What happens if the sample is too small?
It’s not representative of the target population
Give 3 objectives of market research?
Find if demand is increasing, test consumer response, discover needs of customers
What is a Quota sample?
Where a researcher is given specific characteristics
Give a + if quota sampling?
Representative of target market
What is Random Sampling?
Selecting random from a list
What is Market Research?
Gathering and analysing data
Give an example of a secondary and tertiary business?
Car manufacturer and bank
What is the Public Sector?
Sector of the economy owned and controlled by the government
What is the Private sector?
Sector of the economy owned by individuals or groups
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
Give 2 properties of a partnership?
Shared profits, run by 2 or more people
Give 3 + and - of a partnership?
Shares risks, special skills, more finance
Unlimited liability, trust becomes important, arguments in decision making
What are semi variable costs?
Ones that are fixed and variable
Give 2 examples of semi variable costs?
Labour and electricity
What is Contribution?
How much each item goes towards paying off costs
How do you calculate unit costs?
Price- vc per unit
What is an Aim?
Long term intentions of the business
What is an objective?
A goal or target a business strives to achieve to reach the aim
What is price elasticity of demand?
It measures the responsiveness of demand to a change in price
What does elasticity measure?
The extent to which demand will change
How to calculate price elasticity of demand?
Percentage change in quantity demanded // the percentage change in price
How to calculate percentage change?
Change// original x 100
What does price Inelastic mean for demand?
Very little change in demand when price is changed
What happens to demand for price elastic?
Demand is highly responsive to price changes
When a product is price inelastic, what should a firm do to increase revenue?
When a product is price elastic, what should a firm do to increase revenue?
What are the values for price inelastic?
What are the values for price elastic?
How do you work out unit contribution?
Selling price- variable cost per unit
How do you work out total contribution?
Total revenue- total variable costs
How do you work out profit using contribution?
Total fixed costs // contribution
How do you work out break even?
Total fixed costs // contribution
How do you work out margin of safety?
Actual sales - break even point
What is income elasticity of demand?
The responsiveness of demand to a change in income
How to calculate income elasticity of demand?
Percentage in quantity demanded// percentage change in income
Give the 4 types of goods for income elasticity of demand?
How does IED affect normal goods?
As income increases so does demand (positive)
How are luxury goods affected by IED?
Demand will grow at a faster rate than the increase in income (income elastic)
Give an example of a luxury good?
How are inferior goods affected by IED?
When income goes up demand drops
Give an example of inferior goods?
Everyday value beans
What is a business plan?
A blueprint giving details of everything about a business
Give 3 components of a business plan?
Products/services made or sold
Cash flow forecasts/costs
Market research findings
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
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
Give 3 weaknesses of a business plan?
Inaccuracies can lead to unachievable objectives
Give 2 sources of advice for entrepreneurs?
The princes trust
What are fixed costs?
Costs that aren’t affected by output or sales
What are variable costs?
Costs that vary in proportion to changes in the level of output
What is contribution useful for?
Seeing which product of service contributes more to the overall business
What is break even point?
Where total costs are equal to revenue at a certain sales level
Give 2 reasons why firms use break even analysis?
To calculate levels of sales to break even
See how changes in sales affects profit
What is the Margin of safety?
The gap between actual output and break even output
How do you calculate margin of safety?
Unit sales - actual break even
Give 2 strengths of a break even chart?
Useful for business plans
Shows what level of output is required for profit
Give 2 weakness of break even charts?
Variable costs change
Can be hard to calculate if you sell many products
What is the main aim of not for profit enterprises?
To solve societies problems
Give 2 types of not for profit organisations?
What is a market ?
Where buyers and sellers meet
Give 3 types of markets?
What is a sample?
Group of people from the target market
Give 2 problems with market research?
How to calculate market share?
Sales from one business// total market x 100
How do you calculate market growth?
How to calculate market size?
Number of sales in whole market
How do you calculate original value?
Current value// 100 +/- the growth of decline
What are the 4 types of market structure?
How many businesses operate in perfect competition?
A large number of businesses where none is big enough to influence the others
What goods are sold in perfect competition?
Are there barriers to the market in perfect competition?
How many businesses operate in a monopoly market?
A single producer
Is monopoly a price maker or taker?
Are there barriers to the market in monopoly?
What type of products do monopoly markets make?
How many businesses in an oligopoly market?
Only a few dominate the market
What are the products like in oligopolistic markets?
Strong brand identity and big differentiation
Are there barriers to entry in oligopoly markets?
Yes, with high start up costs
Give an example of an oligopoly business?
How many businesses are in monopolistic markets?
A large number of small businesses in competition
What are the products like in monopolistic competition?
Similar, but differentiated from each other
What is brand identity like in monopolistic competition?
Are there barriers to entry in monopolistic competition?
What percentage of market share is regarded monopoly power?
Who investigates where monopoly power is being abused?
The competition and markets authority
What do cartels do?
They try to keep prices high while the business involved share the market between themselves
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
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
The higher the price......
The lower the demand
The lower the price.....
The higher the supply
What causes shifts in the demand curve?
When there is a change in a non price factor
Give 3 non price factors that cause a shift in the demand curve?
Changes in tastes
Changes in income
Changes in advertising
What is supply?
The quantity firms are willing to supply at each price
As the market price of a product increases.....
Produces will increase supply
Give 3 types of non price factors that affect supply?
Raw material prices
Changes in technology
Increase in labour productivity
What is an equilibrium?
Where the quantity demanded is equal to the quantity supplied
What is disequilibrium?
Where demand doesn’t meet supply
What is a surplus?
Where the price is set above the equilibrium, and supplier supply more than buyers want to buy