Unit 1 Key Words

Question 1

Business activity

Answer 1

The process of producing goods and services to satisfy consumer demand.

Question 2

Need

Answer 2

A good or service which is essential to living.

Question 3

Want

Answer 3

A good or service which people like, but isn’t essential for living.

Question 4

Economic problem

Answer 4

Unlimited wants can’t be met because there are limited factors of production. This creates scarcity.

Question 5

Factors of production

Answer 5

The resources needed to produce goods and services - land, labour, capital and enterprise.

Question 6

Scarcity

Answer 6

There are not enough goods and services to meet the wants of the population.

Question 7

Opportunity cost

Answer 7

The benefit that could have been gained from an alternative use of the same resource.

Question 8

Specialisation

Answer 8

People and businesses concentrate on what they are best at.

Question 9

Division of labour

Answer 9

Production is divided into separate tasks and each employee does just one of those tasks.

Question 10

Consumer goods

Answer 10

Products which are sold to the final consumer. They can be seen and touched, for example computers and food.

Question 11

Consumer services

Answer 11

Non-tangible products such as insurance services, transport.

Question 12

Capital goods

Answer 12

Physical goods, such as machinery and delivery vehicles, used by other businesses to help produce other goods and services.

Question 13

Primary sector

Answer 13

Firms whose business activity involves the extraction of natural resources.

Question 14

Secondary sector

Answer 14

Firms that process and manufacture goods from natural resources.

Question 15

Tertiary sector

Answer 15

Firms that supply a service to consumers and other businesses.

Question 16

Quaternary sector

Answer 16

The quaternary sector consists of those industries providing information services.

Question 17

Chain of production

Answer 17

The production and supply of goods to the final consumer involves activities from primary, secondary and tertiary sector businesses.

Question 18

Mixed economy

Answer 18

An economy where the resources are owned and controlled by both the private and public sectors.

Question 19

Private sector

Answer 19

The part of the economy that is owned and controlled by individuals and companies for profit.

Question 20

Public sector

Answer 20

The part of the economy that is controlled by the state or government.

Question 21

Entrepreneur

Answer 21

An individual who has an idea for a new business and takes the financial risk of starting up and managing it.

Question 22

Business Plan

Answer 22

A detailed written document outlining the purpose and aims of a business which is often used to persuade lenders or investors to finance a business proposal.

Question 23

Revenue

Answer 23

The amount a business earns from the sale of its products.

Question 24

Business start-up

Answer 24

A newly formed business. They usually start small, but some might grow to become much bigger.

Question 25

Sole trader

Answer 25

A business that is owned and controlled by just one person who takes all of the risks and receives all of the profits.

Question 26

Start-up capital

Answer 26

The finance needed when first setting up a business.

Question 27

Partnership

Answer 27

A business formed by two or more people who will usually share responsibility for the day-to-day running of the business. Partners usually invest capital in the business and will share profits.

Question 28

Unincorporated business

Answer 28

A business that does not have legal identity separate from its owners. The owners have unlimited liability for business debts.

Question 29

Unlimited liability

Answer 29

If an unincorporated business fails, then the owners might have to use their personal wealth to finance any business debts.

Question 30

Shareholder

Answer 30

A person or organisation who owns shares in a limited company.

Question 31

Private limited company (Ltd)

Answer 31

Often a small to medium-sized company; owned by shareholders who have limited liability. The company can't sell its shares to the general public.

Question 32

Public limited company (plc)

Answer 32

Often a large company; owned by shareholders who have limited liability. The company can sell its shares to the general public.

Question 33

Ordinary shareholders

Answer 33

The owners of a limited company.

Question 34

Limited liability

Answer 34

The shareholders in a limited liability company which fails only risk losing the amount they have invested in the company and not any of their personal wealth.

Question 35

Dividend

Answer 35

A payment, out of profits, to shareholders as a reward for their investment.

Question 36

Collateral

Answer 36

Non-current assets offered as security against borrowing.

Question 37

Franchise

Answer 37

A business system where entrepreneurs buy the right to use the name, logo and product of an existing business.

Question 38

Joint venture

Answer 38

Two or more businesses agree to work together on a project and set up a separate business for this purpose.

Question 39

Public corporation

Answer 39

A business organisation that is owned and controlled by the state.

Question 40

Objective

Answer 40

A statement of a specific target to be achieved. It should be SMART.

Question 41

Market share

Answer 41

The revenue of a business expressed as a percentage of total market revenue.

Question 42

Corporate social responsibility (CSR)

Answer 42

Businesses taking responsibility for the impact their activities might have on society and the environment.

Question 43

Pressure group

Answer 43

A group of like-minded people that puts pressure on businesses and government to change their policies to reach a predetermined objective.

Question 44

Social enterprise

Answer 44

A business with social objectives that reinvests most of its profits back into the business or into benefitting society at large.

Question 45

Stakeholder

Answer 45

An individual or group which has an interest in a business because they're affected by its activities and decisions.

Question 46

Horizontal integration

Answer 46

Brings together two firms in the same industry who are also in the same sector of business activity.

Question 47

Forward vertical integration

Answer 47

Brings together two firms in the same industry but one is the customer of the other.

Question 48

Backward vertical integration

Answer 48

Brings together two firms in the same industry but one is the supplier of the other.

Question 49

Conglomerate integration

Answer 49

The bringing together of two businesses who are in completely different industries.