y10 money matters

the basic economic problem (scarcity)

when the unlimited human wants exceeds the world’s limited supply of resources

land

raw or natural resources that occur naturally from the environment

capital

any man-made tools and machinery used in the production process

labour

the physical and mental effort and the human skills used in the production process

enterprise

an individual who use entrepreneurship to make an economic profit by combining all other factors of production

opportuniy cost

the value of the next best alternative forgone

needs

things that are necessary for survival

examples of needs

food, water, shelter, clothing

wants

material things or desires

goods

tangible items

services

intangible experiences

complementary goods

goods or services that are used with other goods or services

examples of complementary goods

petrol with a car, ink with a printer

demand

the behaviour of buyers towards certain goods and services

law of demand

the lower/higher the price, the higher/lower the demand

supply

the quantity of the good or service that will be provided by a producer at a parsticular price

law of supply

the lower/higher the price, the lower/higher the demand

what happens to supply/demand curve when the price changes?

movement along the curve

what happens to supply/demand curve when something other than price changes?

the curve shifts

factors that cause a shift in the demand curve (other than price)

• price and availability of substitute products

• price and availability of complementary products

• disposable income

sole trader: definition, an advantage and a disadvantage

• one person owns and runs the business

• advantage: easy and cheap to run 

• disadvantage: unlimited liability

partnership: definition, an advantage and a disadvantage

• 2-20 partners run the business together

• advantage: shared decision-making

• disadvantage: shared disputes

incoporation: definition, an advantage and a disadvantage

• when the business is legally its own identity

• advantage: limited liability for shareholders

• disadvantage: costs more money to setup

online business: definition, an advantage and a disadvantage

• sells on the internet

• advantage: no shop rent

• disadvantage: risk of credit card theft

bricks and mortar: definition, an advantage and a disadvantage

• has a real store you can visit

• advantage: you can try on items before purchase

• disadvantage: more costly

bricks and clicks: definition

both a physical store and an online presence

what factors must be considered when considering the location of a business?

• business model

• visibility

• cost

equity finance

• funds contributed by the owner 

• advantage: does not have to be repaid

• disadvantage: owner may expect a good return but only generate low returns

external sources

• short term: bank overdraft, trade credit

• long term borrowing: loan, leasing

factors affecting the choice of finance

• terms of finance

• flexibility

• level of control

csr - corporate social responsibility

when the business takes into consideration how their operations affect their stakeholders, environment, staff and wider public

csr - environmental issues

the owner needs to consider the impact their business has on environment and how it can be better managed

csr - customer issues

• owners should ensure their products are of high quality and reliability

• owners should seek to respect and satisfy customers

csr - staffing issues

the owner should consider fair pay, staff morale and safe and healthy working conditions