Business unit 1

Needs

Goods or services that we need in order to live

Wants

Goods or services which people would like to have but arent essential

Scarcity

There are not enough products to fulfill the wants of the population

Opportunity cost

The thing we give up by choosing another item, the next best alternative

Specialization

When people and businesses focus on what they are best at

Land

All resources provided by nature

Labour

The number of people to make the products

Capital

The finance and equipment needed to make the products

Enterprise

The skill of the person who brings other factors of production together to make goods

Added value

Selling price - total cost

Private sector

Businesses NOT owned by government will make decisions on what and how to produce

Public sector

Owned by the government. Government will make decisions on what and how to produce (ie healthcare, education, public transport)

Purchasing(eos)

When businesses buy in ‘bulk’ so they get cheaper prices

Financial (eos)

Bigger businesses get better interest rates from banks as they are less risk

Technical (eos)

Big businesses can afford specialist machines to do more efficient work with less staff

Internal growth

When the business expands its existing operations

Marketing (eos)

Targeting a larger audience, business advertises its own product rather than having another company do it

External growth

When the business takes over or merges with other businesses

Horizontal integration

Merging/taking over another firm in the same industry

Vertical integration

Firm taking over/merging with another firm in same industry but different stage of production

Conglomerate merger

Firm merging/taking over another firm in a different industry

Dividend

The amount of profit each shareholder gets

Private limited company

Can sell its shares and is an incorporated business

Public limited company

The shares can be sold to the public

Joint venture

When two or more businesses start a project together sharing capital risks and profits

Franchise

An agreement of a business based upon a existing brand/business

Franchisor

The main business/brand

Franchisee

The individual to start up the franchise

Liability

How much the shareholders of a company are liable for the debts in the business

Limited liability

Liability of shareholders is limited to the amount of money they invested

Unlimited liability

Owners of business are held responsible for all the debts of the business

Public sector

Every business owned by the government

Stakeholder

Any person with a direct interest in the performance of a business

Private sector

Any business owned by individuals