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IGCSE Business > Module 1 - Understanding Business Activity > Flashcards

Module 1 - Understanding Business Activity Flashcards

(53 cards)

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1
Q

Needs

A

goods or services that we need in order to live

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2
Q

Wants

A

goods or services which people would like to have but are not essential for living

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3
Q

The basic economic problem is ________ due to unlimited _____ but limited _________

A

scarcity, wants, resources

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4
Q

Scarcity

A

there are not enough products to fulfill the wants of the population

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5
Q

Resources (factors of production) - there are 4

A

Land, labour, capital and enterprise

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6
Q

Land

A

any natural resource used in production

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7
Q

Labour

A

mental and physical efforts of a human

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8
Q

Capital

A

man-made goods used in production

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9
Q

Enterprise

A

the risk-taking ability of an entrepreneur

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10
Q

Opportunity cost

A

the next best alternative given up by choosing another item

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11
Q

Specialisation

A

when people and businesses focus on what they are best at

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12
Q

Division of labour is …

A

when production is split in different tasks and each worker performs one of these tasks

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13
Q

Advantages of specialisation (4)

A

workers specialized in certain task, increases efficiency
less time is wasted from one workbench to another, more efficiency
increased efficiency and so output and may lead to economies of scale
workers become more skilled and experienced reducing mistakes

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14
Q

Disadvantages of specialisation (3)

A

bored workers may lead to decreased efficiency
if a worker is absent, others can’t do their work, decreased efficiency
employees rely on each other for production, productivity may fall

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15
Q

Purposes of business activity (2)

A

combine scarce factors of production to produce goods or services to satisfy people’s wants
employs people as workers and pays them wages to allow them to consume products

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16
Q

Added value

A

the difference between the selling price and the cost of bought-in raw materials and components
ADDED VALUE = SELLING PRICE - TOTAL COST

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17
Q

Added value is not the same as ______ because added value doesn’t include the cost of labour, transport, etc.

A

profit

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18
Q

Ways to increase added value (put simply)

A

increase selling price / decrease cost of materials / increase the worth of the product or service being produced (eg. brand image, features, packaging, quality, etc.)

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19
Q

3 sectors of business

A

Primary, secondary and tertiary

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20
Q

Primary sector

A

extraction of natural resources
eg. farming, fishing

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21
Q

Secondary sector

A

manufacturing and production of goods
eg. car manufacturer

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22
Q

Tertiary sector

Study These Flashcards
A

provides services
eg. hairdressing, banking

23
Q

The relative importance of business sectors in an economy depends on 2 things:

Study These Flashcards
A

the number of workers employed
value of output produced

24
Q

Deindustrialisation occurs when …

Study These Flashcards
A

there is a decline in the importance of the secondary sector of business

25
Causes of deindustrialisation (3)
depletion of primary resources in home country cheaper goods by developing countries ability to spend more income on services
26
Mixed economies have both a _______ ______ and a ______ ______
private sector, public sector
27
Private sector
businesses NOT owned by the government - will make own decisions on what and how to produce; the main aim is to make profit
28
Public sector
businesses owned by the government - the government will decide what and how to produce; the main aim is to offer a service to customers (eg. healthcare, education, public transport, defence)
29
Privatization
the selling of a public sector business to the private sector
30
Privatization may occur as _______ ______ is more _________, ___________ and will be able to make good quality goods leading to higher profits
private sector, efficient, competitive
31
A downside of privatization is that _______ sector businesses do not have ______ objectives, making their products ____________
private, social, unaffordable
32
Entrepreneur
a person who organises, operates and takes risk to make the business better
33
Characteristics of entrepreneurs (8)
Hard working, Risk Takers, Creative, Effective Communicators, Optimistic, Self-confident, Innovative, Independent
34
Advantages of being an entrepreneur (5)
Independent - able to choose how to use time and employment Able to put own ideas into practice May become successful and very profitable if business grows Able to make use of personal interests and skills Profits to themselves - no need to share them with anyone
35
Disadvantages of being an entrepreneur (5)
Expensive - have to invest their own savings into the business Time consuming - searching for other sources of finance Risky - many entrepreneurs' businesses fail Lack of knowledge and experience in starting and operating a business Opportunity cost - not being paid to work for another business
36
Who needs to know the size of the business? (5)
Investors, government, competitors, workers and bank
37
Business plan
contains business objectives, important details about the operations, finance, and the owners
38
Ways business plans assist entrepreneurs (2)
It helps gain finance - banks will ask for a business plan before agreeing to a loan or overdraft for the business It forces the entrepreneur to plan ahead carefully - reduces the risk of the business failing
39
Reasons why governments support business start-ups (4)
Reduce unemployment - new businesses create jobs Increase competition - gives consumers more choice Increase output - economy benefits from increased output Can grow further and become large and important businesses - pay government more taxes
40
Ways governments support entrepreneurs (4)
Business ideas and help - trainings by experienced business people Finance - loans with low interest rates or grants Allow entrepreneurs the use of research facilities Provide grants to train employees to increase efficiency/productivity
41
Measurements of business size (4)
Number of people employed Value of output Value of sales Capital employed
42
Limitation of measuring business size by number of people employed
Some businesses employ few people but produce high output values
43
Limitation of measuring business size by value of output
High level of output does not mean business is big
44
Limitation of measuring business size by value of sales
Different businesses sell different products (expensive and cheap)
45
Limitation of measuring business size by capital employed
Some companies may use cheap labor giving high output with low-cost equipment
46
Reasons for business growth (4)
Higher profits More status for owners and managers Can benefit from Economies of Scale (lower costs) Larger share of its market, ‘big names'
47
2 categories of business growth
Internal and external
48
Internal growth
when the business expands its existing operations
49
External growth
when the business takes over or merges with another business
50
3 types of external growth
Horizontal integration, vertical integration, conglomerate merger`
51
Horizontal integration (define + 2 benefits + 2 problems)
firm taking over/merging with another firm in the same industry Benefits: economies of scale, higher market share Problems: diseconomies of scale, difficulty controlling/managing
52
Vertical integration (define + 2 benefits)
firm taking over/merging with another firm in same industry but different stage of production (forwards or backwards) Benefits: profits by supplier/retailer are absorbed and personal attention is given
53
Conglomerate merger (define + 2 benefits)
firm merging/taking over another firm in a different industry Benefits: spread of risks and transfer of ideas

IGCSE Business (2 decks)

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