Section 1 Purpose of Business Activity

Question 1

NEED

Answer 1

A good or service essential for living

Question 2

WANT

Answer 2

A good or service that people would like to have, but is not required for living

Question 3

ECONOMIC PROBLEM

Answer 3

There exist unlimited wants but limited resources to produce the goods and services to satisfy those wants. This creates scarcity.

Question 4

FACTORS OF PRODUCTION

Answer 4

Resources needed to produce goods or services

Question 5

SCARCITY

Answer 5

A situation that exists when there are unlimited wants and limited resources to produce the goods and services to satisfy those wants.

Question 6

OPPORTUNITY COST

Answer 6

The next best alternative after choosing another item

Question 7

LAND

Answer 7

The natural resources that can be obtained from nature

Question 8

LABOUR

Answer 8

The physical and mental efforts put in by the workers in the production process. The reward for labour is wage/salary

Question 9

CAPITAL

Answer 9

The finance, machinery, and equipment needed for the production of goods & services

Question 10

ENTERPRISE

Answer 10

The risk-taking ability of the person who brings the other factors of production together to produce a good or service. The reward is profit from the business

Question 11

SPECIALIZATION

Answer 11

When a person or organization concentrates on a task which they are best at

Question 12

DIVISION OF LABOUR

Answer 12

The production process is split up into different tasks and each worker performs one of these tasks. It is a form of specialization.

Question 13

BUSINESS

Answer 13

Any organization that uses all the factors of production (resources) to create goods and services to satisfy human wants & needs

Question 14

ADDED VALUE

Answer 14

The difference between the cost of materials bought in and the selling price of the product

Question 15

PRIMARY SECTOR

Answer 15

The use/extraction of natural resources

Question 16

SECONDARY SECTOR

Answer 16

The manufacture of goods using the resources from the primary sector

Question 17

TERTIARY SECTOR

Answer 17

All the services provided in an economy

Question 18

INDUSTRIALIZATION

Answer 18

A country moving from the primary sector to the secondary sector

Question 19

DE-INDUSTRIALIZATION

Answer 19

A country moving from the secondary to the tertiary sector

Question 20

MIXED ECONOMY

Answer 20

Has both a private and a public sector

Question 21

CAPITAL

Answer 21

The money invested into a business by the owners

Question 22

PRIVATE SECTOR

Answer 22

Private individuals own and run business ventures

Question 23

PUBLIC SECTOR

Answer 23

The government owns and runs business ventures.

Question 24

ENTREPRENEUR

Answer 24

A person who organizes, operates and takes risks for a new business venture

Question 25

BUSINESS PLAN

Answer 25

A document containing the business objectives and important details about the operations, finance and owners of the new business.

Question 26

CAPITAL EMPLOYED

Answer 26

The total value of capital used in the business

Question 27

INTERNAL GROWTH

Answer 27

When a business expands its existing operations

Question 28

EXTERNAL GROWTH / INTEGRATION

Answer 28

When a business takes over or merges with another business

Question 29

MERGER

Answer 29

When the owner of two business agree to join their firms together to make one business

Question 30

TAKEOVER

Answer 30

When one business buys out the owners of another business, which then becomes part of the ‘predator’ business

Question 31

HORIZONTAL INTEGRATION

Answer 31

When one firm merges with or takes over another one in the same industry at the same stage of production

Question 32

VERTICAL INTEGRATION

Answer 32

When one firm merges or takes over another firm in the same industry but ` a different stage of production

Question 33

CONGLOMERATE INTEGRATION

Answer 33

When one firm merges with or takes over a firm in a completely different industry. This is also known as diversification

Question 34

SOLE TRADER

Answer 34

A business organization owned and controlled by one person. Sole traders can employ other workers, but only he/she invests and owns the business.

Question 35

LIMITED LIABILITY

Answer 35

The liability of the shareholders in a company is limited to only the amount they invested

Question 36

UNLIMITED LIABILITY

Answer 36

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.

Question 37

PARTNERSHIP

Answer 37

A form of business in which two or more people agree to jointly own a business

Question 38

PARTNERSHIP AGREEMENT

Answer 38

A legal agreement between two or more (usually up to twenty) people to own, finance and a run a business jointly and to share all profits.

Question 39

UNINCORPORATED BUSINESS

Answer 39

A business that does not have a separate legal identity. Sole traders and partnerships are unincorporated businesses.

Question 40

PRIVATE LIMITED COMPANIES

Answer 40

One or more owners who can sell its shares to only the people known by the existing shareholders

Question 41

PUBLIC LIMITED COMPANIES

Answer 41

Two or more owners who can sell its shares to any individual/organization in the general public through stock exchanges

Question 42

FRANCHISES

Answer 42

The owner of a business (the franchisor) grants a license to another person or business (the franchisee) to use their business idea

Question 43

JOINT VENTURE

Answer 43

An agreement between two or more businesses to work together on a project

Question 44

STAKEHOLDERS

Answer 44

Any person or group that is interested in or directly affected by the performance or activities of a business