Studied by 1 person
cause of the economic problem
unlimited wants + limited resources = scarcity
opportunity cost
next best alternative forgone
advantages of division of labour
workers are trained in one task and therefore are more skilled, less time is wasted and training is cheaper
disadvantages of division of labour
workers can be bored and lead to drops in productivity, absenteeism can stop production
business activity
combines scarce factors of production, produces goods and services and employs labour
added value
selling price - cost price
how to increase added value
reduce costs or increase price
primary sector
resources
secondary sector
production
tertiary sector
retail
relative importance of economic sectors
percentage of the countries total workers in each sector / value of output of each sector as a percentage of the countries total output
mixed economy
private and public sectors
benefits of being an entrepreneur
larger profits compared to working as an employee, personal fame and recognition, independence and ability to use own skills
disadvantages of being an entrepreneur
risk, lack of capital and knowledge and opportunity cost of being an employee
characteristics of successful entrepreneurs
hard working, risk taking, creative, optimistic, confident, innovative, independent and effective communicator
business plan
a written document that provides a description and overview of your companies future
contents of a business plan
description, what product, the market, location, management, financial information and business strategy
use of a business plan
helps gain capital and reduces risk through careful planning
methods of measuring business size
no of people employed, value of output/sales/capital employed
why business owners may want to expand their business
possibility of higher profits, lower costs, larger market share
different ways of business growth
internal/external
external growth
horizontal merger, vertical integration, conglomerate merger
horizontal integration
one firm mergers with another in the same industry and at the same sector, less competition and more market share
forward vertical integration
one firm mergers with another firm in the same industry but at a further stage, assured outlet, more profit from retailer, information about consumer wants
backward vertical integration
one firm mergers with another firm in the same industry but at a backward stage, assured supply, more profit, less cost
conglomerate integration
one firm mergers with another firm in a completely different industry, diversification, transfer of ideas
problems of business growth
difficult to control, lack of communication, expansion costs, differences in management
why some businesses remain small
type of industry, market size, owners objective
causes of business failure
lack of management, change in environment, liquidity problems and over-expansion
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Flashcard (31)