Flashcards in What is a Business? Deck (35)
Economy is divided into
Different business sectors and the businesses within them exist to provide goods or services.
All businesses have
Inputs and outputs
Businesses must add
value during production.
Types of business
- Small firms; owned/run by 1 self- employed individual.
- Large companies; employ thousands of staff all over the world.
Businesses exist to
Provide goods or services
Amount of businesses that start up each year
Nearly half a million.
Majority of businesses are
Small and operate in the service sector.
Business production and distribution (in order).
Inputs, Production, Outputs, Customer, Consumer
Added value increases during
Inputs, production, outputs and distribution in a grocery store.
Sell businesses the products they need
Individual who uses a product
Example of when a customer and consumer are different people
Parent (customer) buys a pen for their child (consumer) to use at school.
Sell to their customers in markets
Examples of Markets
- High street shop
Businesses are likely to be in competition with
Other firms offering similar products
Businesses buy the products they need from
Suppliers (and then sell to customers)
Firms selling products to other businesses.
The individual who uses the product sold by a business.
Businesses sell to customers in
In order to create goods and services
a business buys or hires inputs which are transformed into outputs called products.
These are the goods and services used by consumers.
Examples of Inputs such as
Raw materials, equipment, buildings and staff.
These inputs are transformed into
Outputs called products.
A business adds value when
The selling price of an item produced is higher than the cost of all the resources used to make it.
Example of Adding Value
Pair of designer sunglasses sell for £100.
If the cost of the materials, employees, marketing and all other inputs used in making one set of sunglasses is just £20 - £80 worth of value has been added by the firm during production.
3 main types of industry in which firms operate
Primary production, secondary production and tertiary production
These sectors (the types of industry in the firm) form
A chain of production which provides customers with finished goods or services.
Involves acquiring raw materials.
Eg - metals and coal have to be mined
Examples of Primary Production
Metals and coal are mined, oil drilled from the ground, rubber tapped from trees, foodstuffs farmed and fish trawled (Extractive Production)
The manufacturing and assembly process.
Involves converting raw materials into components and assembling the product.
Example of Secondary Production: Converting raw materials into components
Making plastics from oil.
Example of Secondary Production: Assembling the product
Building houses, bridges and roads.
Refers to the commercial services that support the production and distribution process.
Example of Tertiary Production
Insurance, transport, advertising, warehousing and other services such as teaching and health care.