Section-1 Understanding business activity

Question 1

What is a need?

Answer 1

A good or service essential for living.

Question 2

What is a want?

Answer 2

A good or service which people would like to have but which is not essential for living.

Question 3

What is the economic problem?

Answer 3

Unlimited wants but limited resources to produce goods and services.

Question 4

Define scarcity.

Answer 4

The lack of sufficient products to fulfil the total wants of the population.

Question 5

What is opportunity cost?

Answer 5

The next best alternative given up by choosing another item.

Question 6

What occurs during specialization?

Answer 6

People and businesses concentrate on what they are best at.

Question 7

Define division of labour.

Answer 7

When the production process is split up into different tasks and each worker performs one of those tasks.

Question 8

What do businesses combine to make goods and services?

Answer 8

The factors of production.

Question 9

What is added value?

Answer 9

The difference between the selling price and the cost of bought-in materials and components.

Question 10

What does the primary sector of industry do?

Answer 10

Extracts and uses the natural resources of Earth to produce raw materials.

Question 11

What is the role of the secondary sector of industry?

Answer 11

Manufactures goods using the raw materials provided by the primary sector.

Question 12

What does the tertiary sector of the industry provide?

Answer 12

Services to consumers and other sectors of industry.

Question 13

What is de-industrialisation?

Answer 13

A decline in the importance of the secondary manufacturing sector of industry in a country.

Question 14

What characterizes a mixed economy?

Answer 14

It has both a private sector and a public (state) sector.

Question 15

What is capital in a business context?

Answer 15

The money invested into the business by the owners.

Question 16

Who is an entrepreneur?

Answer 16

A person who organises, operates and takes the risk for a new business venture.

Question 17

Define capital employed.

Answer 17

The total value of capital used in the business.

Question 18

What is internal growth in a business?

Answer 18

When a business expands its existing operations.

Question 19

What is external growth?

Answer 19

When a business takes over or merges with another business.

Question 20

What is a takeover or acquisition?

Answer 20

When one business buys out the owners of another business.

Question 21

Define a merger.

Answer 21

When the owners of two businesses agree to join their businesses together.

Question 22

What is horizontal integration?

Answer 22

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

Question 23

What is vertical integration?

Answer 23

When one business merges with or takes over another in the same industry but at a different stage of production.

Question 24

Define conglomerate integration.

Answer 24

When one business merges with or takes over a business in a completely different industry.

Question 25

What is a sole trader?

Answer 25

A business owned by one person.

Question 26

What does limited liability mean?

Answer 26

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

Question 27

What does unlimited liability mean?

Answer 27

Owners can be held responsible for the debts of the business beyond their investment.

Question 28

What is a partnership?

Answer 28

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

Question 29

What are unincorporated businesses?

Answer 29

Businesses that do not have a separate legal identity.

Question 30

What are incorporated businesses?

Answer 30

Companies that have separate legal status from their owners.

Question 31

Who are shareholders?

Answer 31

The owners of a limited company who buy shares representing part-ownership.

Question 32

What characterizes private limited companies?

Answer 32

They cannot sell shares to the public.

Question 33

What are public limited companies?

Answer 33

Businesses that can sell shares to the public and have shares tradable on the Stock Exchange.

Question 34

What are dividends?

Answer 34

Payments made to shareholders from the profits of a company.

Question 35

What is a franchise?

Answer 35

A business based upon the use of the brand names and trading methods of an existing successful business.

Question 36

Define a joint venture.

Answer 36

Where two or more businesses start a new project together, sharing capital, risks and profits.

Question 37

What is a public corporation?

Answer 37

A business in the public sector that is owned and controlled by the state.

Question 38

What are business objectives?

Answer 38

The aims or targets that a business works towards.

Question 39

Define profit.

Answer 39

The total income of a business minus total costs.

Question 40

What is market share?

Answer 40

The percentage of total market sales held by one brand or business.

Question 41

What is a social enterprise?

Answer 41

A business with social objectives as well as an aim to make a profit.

Question 42

What is a stakeholder?

Answer 42

Any person or group with a direct interest in the performance and activities of a business.