Unit 1. Understanding Business

Business activity

The need for a good or service essential to living.

Scarcity

The economic problem of unlimited wants that cannot be met because of limited resources.

Opportunity cost

The benefit that could’ve been gained from an alternative use of resources.

Factors of production

Components needed to produce goods and services, including land, labour, capital, and enterprise.

Land

All natural resources used for production.

Labour

The number of people available for work.

Capital

Machinery, equipment, and money needed for production.

Enterprise

People prepared to take the risk of starting a business (entrepreneurs).

Specialisation

The concentration of individuals and businesses on what they do best.

Chain of production

The process involving all three sectors of production to supply goods to customers.

Private sector

Businesses owned by individuals aiming to make a profit.

Public sector

Businesses owned by the government that produce goods and services for the public.

Mixed economy

An economy that includes both public and private sectors.

Measuring business size

Methods include capital employed, value of output, number of employees, and market share.

Poor management skills

A common reason businesses fail, leading to ineffective operations.

Internal growth

Strategies such as increasing production and developing new products.

External growth

Growth strategies involving mergers or acquisitions between firms.

Sole trader

A business owned and managed by one person, with unlimited liability.

Partnership

A business owned and managed by two or more people, also with unlimited liability.

Limited liability

A structure where shareholders are not personally liable for the company's debts.

Private limited company (ltd)

A company owned by shareholders that cannot sell shares to the general public.

Public limited company (plc)

A company owned by shareholders that can sell shares to the general public.

Franchise

A business model where entrepreneurs buy rights to operate under an existing business's name.

Joint venture

A partnership where two or more businesses collaborate on a project while remaining separate.

Business objective

Specific tasks and goals the business needs to achieve to reach its aim.