CAIE IGCSE Business Studies (0450) Definitions

These flashcards summarize key definitions and concepts from the Business Studies syllabus in preparation for the exam.

Need

A good or service essential for living.

Want

A good or service which people would like to have but which is not essential for living.

Economic Problem

There exist unlimited wants but limited resources to produce the goods and services to satisfy those wants.

Scarcity

The lack of sufficient products to fulfil the total wants of the population.

Opportunity Cost

The next best alternative given up by choosing another item.

Specialization

Occurs when people and businesses concentrate on what they are best at.

Factors of Production

Resources needed to produce goods and services, available in limited supply.

Added Value

The difference between the selling price and the cost of bought-in materials and components.

Primary Sector

The sector of industry that extracts and uses natural resources to produce raw materials.

Secondary Sector

The sector of industry that manufactures goods using raw materials provided by the primary sector.

Tertiary Sector

The sector of the industry that provides services to consumers and other sectors.

De-industrialisation

Occurs when there is a decline in the importance of the secondary manufacturing sector in a country.

Mixed Economy

An economy that has both a private sector and a public (state) sector.

Capital

The money invested into the business by the owners.

Entrepreneur

A person who organizes, operates, and takes the risk for a new business venture.

Internal Growth

Occurs when a business expands its existing operations.

External Growth

When a business takes over or merges with another business.

Takeover

When one business buys out the owners of another business.

Merger

When the owners of two businesses agree to join their businesses together.

Horizontal Integration

When one business merges with or takes over another in the same industry at the same stage of production.

Vertical Integration

When one business merges with or takes over another in the same industry but at a different stage of production.

Conglomerate Integration

When one business merges with or takes over a business in a completely different industry.

Sole Trader

A business owned by one person.

Limited Liability

The liability of shareholders in a company is limited to the amount they invested.

Unlimited Liability

Owners can be held responsible for the debts of the business beyond their investment.

Partnership

A form of business in which two or more people agree to own a business jointly.

Incorporated Business

Companies that have separate legal status from their owners.

Shareholders

The owners of a limited company who buy shares representing part-ownership.

Dividend

Payments made to shareholders from the profits of a company.

Franchise

A business based upon the use of the brand names and trading methods of an existing successful business.

Joint Venture

Where two or more businesses start a new project together, sharing capital, risks, and profits.

Public Corporation

A business in the public sector owned and controlled by the state.

Business Objectives

The aims or targets that a business works towards.

Profit

The total income of a business minus total costs.

Market Share

The percentage of total market sales held by one brand or business.

Stakeholder

Any person or group with a direct interest in the performance and activities of a business.

Motivation

The reason why employees want to work hard and effectively for the business.

Wage

A payment for work, usually paid weekly.

Salary

Payment for work, usually paid monthly.

Bonus

An additional payment above basic pay as a reward for good work.

Commission

A payment relating to the number of sales made.

Job Satisfaction

The enjoyment derived from feeling that you have done a good job.

Job Rotation

Workers swap around and do each specific task for only a limited time.

Delegation

Giving a subordinate the authority to perform particular tasks.

Autocratic Leadership

A leadership style where the manager expects to be in charge and have their orders followed.

Democratic Leadership

Leadership style that involves employees in the decision-making process.

Laissez-faire Leadership

Leadership style where broad objectives are given, but employees organize their own work.

Recruitment

The process of identifying the business needs to employ someone.

Job Analysis

Identifies and records responsibilities and tasks relating to a job.

Job Description

Outlines the responsibilities and duties for a specific job.

Induction Training

An introduction given to a new employee explaining business activities.

On-the-job Training

Training occurs by watching a more experienced worker.

Off-the-job Training

Training away from the workplace, usually by specialists.

Communication Barriers

Factors that stop effective communication of messages.

Marketing

Identifying customer wants and satisfying them profitably.

Market Research

The process of gathering and analyzing information about a market.

Product Orientated Business

A business primarily focused on the product itself.

Market Orientated Business

A business that carries out market research to find out consumer wants.

Marketing Mix

Activities summarized as the four Ps - product, price, place, and promotion.

Cash Flow

The cash inflows and outflows over a period of time.

Liquidity

The ability of a business to pay back its short-term debts.

Globalisation

Increases in worldwide trade and movement of people and capital between countries.