Business Concepts and Classifications

This flashcard set covers the fundamental characteristics of business, the classification of industries and commerce, and the nature and causes of business risk.

Economic Activity

An activity undertaken to earn money, as opposed to non-economic actions done out of love or charity.

Sale or Exchange

A characteristic of business where goods and services must be traded for value rather than being for personal use.

Regular Dealings

A business characteristic requiring a series of transactions, as single transactions do not count as a business.

Profit Motive

The core incentive to keep an enterprise running by earning a profit.

Uncertainty of Return

The constant risk of loss or the lack of a guaranteed clear profit in business.

Industry

Activities concerned with converting raw materials into useful products.

Primary Industry

Activities involving the extraction of natural resources, such as farming, mining, and agriculture.

Secondary Industry

Activities centered on manufacturing and construction to build products.

Tertiary Industry

The service sector, including banking, transport, and hotels, which supports other industry groups.

Commerce

All activities that function to remove hindrances in the process of exchange.

Trade

The buying and selling of goods, which can be internal or external.

Auxiliaries to Trade

Support services including transport, warehousing, insurance, advertising, and banking that assist the process of trade.

Transport

An auxiliary to trade that provides place utility.

Warehousing

An auxiliary to trade that provides time utility.

Insurance

An auxiliary to trade that provides risk utility.

Advertising

An auxiliary to trade that provides information utility.

Banking

An auxiliary to trade that provides finance utility.

Business Risk

An unavoidable part of every business for which profit is considered the reward or premium.

Natural Causes of Risk

Factors like floods, earthquakes, and famines that cause business risk.

Human Causes of Risk

Business risks arising from strikes, employee theft, or carelessness.

Economic Causes of Risk

Risks caused by sudden price fluctuations, changes in demand, or competition.