Section 1 -- Understanding business activity Flashcards
Business activity, classification of businesses, Enterprise business growth and size, types of business organisation, business objectives and stakeholder objectives
Define ‘need’
A good or service essential for living
define ‘want’
A good or service which people would like to have, but which is not essential for living. Peoples wants are unlimited.
define ‘economic problem’
There exist unlimited wants but limited resources to produce the goods and services to satsify those wants. This creates scarcity
define ‘factors of production’
the resources needed to produce goods and services. There are 4 factors of production and they are in limited supply
define ‘scarcity’
The lack of sufficient products to fulfil the total wants of the population
Describe the 4 factors of production
- LAND – all the natural resources provided by nature and includes fields and forests, oil, gas, metals and other mineral resources
- LABOUR – number of people available to make productions
- CAPITAL – Finance, machinery and equipment needed for the manufacture of goods
- ENTERPRISE – person who brings the other 3 factors of production together to produce a good or service
define ‘opportunity cost’
the next best alternative given up by choosing another item
define ‘specialisation’
when people and businesses concentrate on what they are best at
list 3 reasons why specialisation is very common
- specialised machinery and technology widely available
- increasing competition means businesses have to keep their costs low
- most people recognise that higher living standards can result from being specialised
define ‘division of labour’
when the production process is split up into different tasks and each worker performs one of these tasks. This is a form of specialisation
List 2 advantages and disadvantages of division of work
Advantages:
1. workers are trained in one task and specialise in this leading to increased efficiency and output
2. less time is wasted moving from one workbench to another
disadvantages:
1. workers can become bored doing just one task, leading to efficiency falling
2. If one worker is absent no one else can do the job, production might be stopped
define ‘businesses’
the combining factors of production to make goods and services which satisfy peoples wants
define ‘added value’
the difference between the selling price and the cost of bought in materials and components
explain why added value is important
added value is important because sales revenue is greater than the cost of materials bought in by the business. This means the business;
- can pay other costs
- able to make profit
define ‘primary sector’
industry extracts and uses the natural resources to produce raw materials used by other businesses
list the 3 stages in production
- primary sector – industry gathering raw materials for business to use
- secondary sector– taking the raw materials and resources provided by primary sector and converting them into manufactured or processed goods.
- Tertiary sector – providing services to both consumers and other businesses
define ‘secondary sector’
industry manufactures goods using the raw materials provided by the primary sector
define ‘tertiary sector’
industry provides services to consumers and the other sectors of industry
define ‘de-industrialisation’
when there is a decline in the important of a secondary, manufacturing sector of industry in a country
define ‘mixed economy’
both private sector and public sector
describe private sector
businesses not owned by the government. These businesses make their own decisions of what to produce, how, and what price it will be charged for
describe public sector
businesses owned by the government or state, do not make decisions of the production process, or what price it is sold as. Often free of charge to consumer
define ‘capital’
the money invested into a business by the owners
define ‘entrepreneur’
a person who organises, operates and takes the risk for a new business venture
