Business Activity, Economic Sectors, and Enterprise

Vocabulary practice flashcards covering fundamental business activities, factors of production, economic sectors, adding value, entrepreneurship, business planning, and methods of business growth.

Business

An organisation that combines factors of production to make products (goods and services) which satisfy people's wants.

Goods

Tangible products made by businesses to be sold to customers, such as cars and clothes.

Services

Intangible products, such as banking or transport, that are provided by businesses to customers.

Factors of production

Those resources needed to produce goods or services: land, labour, capital, and enterprise. They are in limited supply.

Land

All of the natural resources provided by nature that are used in the production of goods and services, including fields, forests, oil, gas, metals, and other mineral resources.

Labour

The number of people available to make products and the skills they have.

Capital

The finance, machinery, and equipment needed for the manufacture of goods or the provision of services; or the money invested into a business by the owners.

Enterprise

The skill and risk-taking ability of the person who brings the other resources or factors of production together to produce a good or service.

Scarcity

The economic problem resulting from the limited supply of factors of production being insufficient to produce all the needs and unlimited wants of a whole population.

Added value

The difference between the selling price of a product and the cost of bought-in materials and resources needed to produce it.

Opportunity cost

The value of the next best alternative given up when choosing one option over another.

Primary sector of industry

The sector that extracts and uses the natural resources from the Earth to produce raw materials used by other businesses.

Secondary sector of industry

The sector that manufactures or processes goods using the raw materials provided by the primary sector.

Tertiary sector of industry

The sector that provides goods and services to consumers and the other economic sectors.

Private sector

The part of the economy owned and operated by individuals and companies, usually for profit, and not controlled by the state or government.

Public sector

The part of the economy made up of organisations and businesses that are owned and controlled by the government.

Entrepreneur

A person who has an idea for a new business, starts it up, and accepts the risks of the new business venture.

Business plan

A written document that describes a business, its objectives, its strategies, the market it is in, and its financial forecasts.

Capital employed

The total amount of capital invested in a business for the purpose of generating profits.

Capital-intensive business

A business that uses production methods employing very few people but relying on a great deal of high-cost capital equipment to produce high output levels.

Labour-intensive business

A business that relies heavily on a high number of workers rather than capital equipment to produce handcrafted or specialised output.

Internal growth

Business growth that occurs when a business expands its existing operations without joining with another business.

External growth

Business expansion achieved when a business takes over or merges with another business, also known as integration.

Takeover

A form of external growth where one business buys out the owners of another business, which then becomes part of the predator business.

Merger

A form of external growth where the owners of two businesses agree to join their businesses together to form one business.

Horizontal integration

External growth occurring when one business merges with or takes over another business operating in the same industry at the same stage of production.

Vertical integration

External growth occurring when one business merges with or takes over another business operating in the same industry at a different stage of production.

Forward vertical integration

Vertical integration where a business integrates with another business that operates at a later stage of production, closer to the consumer.

Backward vertical integration

Vertical integration where a business integrates with another business that operates at an earlier stage of production, closer to the source of supplies.

Sole trader

A business owned and controlled by one person.