Unit 1 Key Terms

Question 1

Adding value

Answer 1

The practice of producing a good or service that is worth more than the cost of the resources used in the production process

Question 2

Businesses

Answer 2

Organisations involved in the production of goods and/or the provision of services

Question 3

Consumers

Answer 3

The people or organisations that actually use a product

Question 4

Customers

Answer 4

The people or organisations that buy the product

Question 5

Entrepreneurs

Answer 5

The people who manage, organise and plan the resources needed for business activity in pursuit of organisational objectives. They are risk takers who exploit business opportunities in return for profits

Question 6

Entrepreneurship

Answer 6

Refers to the collective knowledge, skills and experiences of entrepreneurs

Question 7

Goods

Answer 7

Physical products produced and sold to customers , such as laptops, books, contact lenses, perfumes and children toys

Question 8

Needs

Answer 8

Basic necessities that a person must have to survive, including food, water, warmth, shelter and clothing

Question 9

Primary sectors

Answer 9

Refers to businesses involved in the cultivation or extraction of natural resources, such as farming, mining, quarrying, fishing, oil exploration and forestry

Question 10

Production

Answer 10

The process of creating goods and/or services, adding value in the process

Question 11

Quaternary sector

Answer 11

A sub-category of the tertiary sector, where businesses are involved in intellectual and knowledge-based activities that generate and share information, such as research organisations

Question 12

Secondary sector

Answer 12

Refers to businesses concerned with the construction and manufacturing of products

Question 13

Services

Answer 13

Intangible products sold to customers, such as the services provided by airlines, restaurants, cinemas, banks, health and beauty spas, schools and hospitals

Question 14

Tertiary sector

Answer 14

Refers to businesses involved with the provision of services to customers

Question 15

Wants

Answer 15

People’s desires, I.e. the things they would like to have, such as new clothes, smartphones, overseas holidays and jewellery.

Question 16

Cooperatives

Answer 16

For-profit social enterprises set up, owned and run by their members, who might be employees and/or customers

Question 17

Company (corporation)

Answer 17

Refers to a limited liability business that is owned by shareholders. A certificate of incorporation gives the company a separate legal identity from its owners (shareholders).

Question 18

Deed of partnership

Answer 18

The legal contract signed by the owners of a partnership. The formal deeds specify the name and responsibilities of each partner and their proportion of any profits or losses.

Question 19

Incorporation

Answer 19

Means that there is a legal difference between the owners of a company and the business itself. This ensures that the owners are protected by limited liability.

Question 20

Initial public offering (IPO)

Answer 20

Occurs when a business sells all or part of its business to shareholders on a public stock exchange for the first time. This changes the legal status of the business to a publicly held company.

Question 21

Limited liability

Answer 21

A restriction on the amount of money that owners of a company can lose if the business goes bankrupt, I.e. shareholders cannot lose more than the amount they invested in the company

Question 22

Non-governmental organisations (NGOs)

Answer 22

Private sector not-for-profit social enterprises that operate for the benefit of others rather than primarily aiming to earn a profit, such as Oxfam and Friends of the Earth

Question 23

Partnerships

Answer 23

A type of private sector business entry owned by 2-20 people (known as partners). They share the responsibilities and burdens of running and owning the business

Question 24

Private sector

Answer 24

The part of the economy run by private individuals and businesses, rather than by the government, such as sole traders, partnerships, privately held companies and publicly held companies

Question 25

Privately held company

Answer 25

A business owned by shareholders with limited liability but whose shares cannot be bought by or sold to the general public on a Stock Exchange

Question 26

Privately held company

Answer 26

A business owned by shareholders with limited liability but whose shares cannot be bought by or sold to the general public on a Stock Exchange

Question 27

Publicly held company

Answer 27

An incorporated limited liability business that allows shareholders to buy and sell shares in the company via a public Stock Exchange

Question 28

Public sector

Answer 28

The part of the economy controlled by the government. Examples include state healthcare and education services, the emergency services, social housing and national defence

Question 29

Sole trader

Answer 29

A self-employed person who runs the business on his/her own. This means they have exclusive responsibility for its success (profits) or failure (unlimited liability)

Question 30

Social enterprises

Answer 30

Revenue-generating businesses with social objectives at the core of their operations. They can be for-profit or non-profit business entities, but all profits or surpluses must be reinvested for the social purpose rather than being distributed to shareholders and owners.

Question 31

Stock exchange

Answer 31

A marketplace for trading stocks and shares of publicly held companies (or public limited companies). Examples include the London Stock Exchange and the New York Stock Exchange

Question 32

Unlimited liability

Answer 32

A feature of sole traders and ordinary partnerships who are legally liable or responsible for all monies owed to their creditors, even if this means that they have to sell their personal possessions to pay for their debts.

Question 33

Corporate social responsibility (CSR)

Answer 33

The conscientious consideration of ethical and environmental practice related to business activity. A business that adopts CSR acts morally towards all of its various stakeholder groups and the well-being of society as a whole