Economics chapter six test prep

Primary industry

Resource extraction - Activities that take raw materials directly from nature (getting resources out of ground or nature)

Examples - Farming, fishing, forestry, mining, hunting

Secondary industry

Manufacturing - Activities that turn raw materials into finished products (Factories and making products)

Examples - Steel mills, paper plants, breweries, factories

Tertiary Industry

Helping and providing service - Activities that provide services instead of physical goods

Examples - Wholesale and retail sales, outlets, clinics, schools

Quaternary industry

Advanced services and technology - Activities that provide highly specialized knowledge, technology, and research.

Examples - IT design and software development, applied nuclear technology, scientific research centers

Sole propietorship

A sole proprietorship is a business that is owned and operated by one person who receives all the profits and is responsible for all losses.

partnership

A business owned by two or more people who run it together under an agreement.

corporation

A business that is legally separate from its owners and is created by government approval.

co-operative

A business owned and run by its members who share a common goal.

advantages and disadvantages of Sole propietorship

Advantages

• Easy to form

• Low start-up costs

• Owner has full control of decisions

• Minimal working capital required

• Tax advantages for owner

• All profits go to owner

• Less administrative paperwork

Disadvantages

• Unlimited liability

• Difficult to raise capital

• Lack of continuity if owner is absent

advantages and disadvantages of Partnership

Advantages

• Ease of formation

• Broader management base

• Low start-up cost

• Additional sources of investment

Disadvantages:

• Capital divided authority

• Lack of continuity

• Hard to find suitable partners

• Possible development of conflict between partners

• Unlimited liability (for general partners)

advantages and disadvantages of corporation

Advantages

• Limited risk

• Expert management

• Can sell ownership

• Lasts forever

• Own legal person

• Possible lower tax

• Easier to get money

Disadvantages

• Many rules

• Expensive to start

• Must follow charter

• Lots of paperwork

• Taxes twice

advantages and disadvantages of co-operatives

Advantages

• Owned and run by members

• Everyone gets one vote

• Limited risk

• Profits shared fairly among members

Disadvantages

• Possible fights between members

• Lots of paperwork

• Decisions take longer

• Members must participate for success

• Less reason to put in extra money

Small businesses

• Limited up to 50 people

• Successful small businesses are able to adapt well to the market - high competition

• Can grow to a medium sized business (50-500 people) - or maintain their business size

• They grow by buying or combining companies

Big businesses

• 500+ workers

• Produces many products and services

• They grow by buying or combining companies

Horizontal intergration

• Buying or merging with a company that makes the same product or service

• Helps increase market share and reduce competition

Vertical intergration

• Combining companies before or after making the product

• Helps control the process, lower cost, expand business

Corporate alliances

• When companies work together as a single company without actually merging

Corporate concentration

• Where few big major companies control most business and economy

• They control it by dominating the market by being more successful than other companies

Book value

The price of a stock at a certain time that changes on the market

Market value -

The price of a stock at a certain time on the stock market

Asset value

It is a price of a portion of the company price (per share)

bear market

traders expect the stock to go down more, so the sell right away, then buy it when it is about to go up

Bull market

Traders expect prices to rise → buy now, then sell later when prices are higher

Stock market indicators

A tool or number that shows how well the stock is doing at a certain time

DOW Jones industrial average

• Tracks 30 big US companies

• Show overall stock trend

• Goes up, market goes up

• Goes down, market goes down

• Mirror of the U.S stock market

Multination corporation

• Big company making financial, production, marketing decisions and does business globally

• They do this to save money with cheaper labor and taxes in other countries

Mutual funds

• People don’t pick stocks themselves

• They give their money to a fund manager

• The fund manager decides what to buy, sell, or trade with the pooled money-

• People give money to a manager who buys, sells, and trades stocks for them

Broker commisions

When you pay and hire one person to buy/sell stocks for you

Call broker → they trade for you → you pay commission