Business Studies iGCSE (CIE) Unit 1 - Business Activity Key Terms

key terms for unit 1

Business activity

the process of producing goods and services to satisfy consumer demand

Need

a good or service which is essential to living

Want

a good or service which people would like, but is not essential for living

Economic problem

unlimited wants cannot be met because there are limited factors of production and creates scarcity

Factors of production

the resources needed to produce goods and services - land, labour, capital, enterprise

Scarcity

there are not enough goods and services to meet the wants of the population

Opportunity cost

the benefit that could have been gained from an alternative use of the same resource.

Specialisation

people and businesses concentrate on what they’re best at

Division of labour

production is divided into separate tasks and each employee does just one of those tasks

Consumer goods

products which are sold to the final consumer and can be seen and touched (e.g. computers and food)

Consumer services

non-tangible products such as insurance services, transport

Capital goods

physical goods, such as machinery and delivery vehicles, used by other businesses to help produce other goods and services

Primary sector

firms whose business activity involves the extraction of natural resources

Secondary sector

firms that process and manufacture goods from natural resources

Tertiary sector

firms that supply a service to consumers and other businesses

Chain of production

the production and supply of goods to the final consumer involves activities from primary, secondary and tertiary sector businesses

Mixed economy

an economy where the resources are owned and controlled by both the private and public sectors

Private sector

the part of the economy that is owned and controlled by individuals and companies for profit

Public sector

the part of the economy that is controlled by the state or government

Entrepreneur

an individual who has an idea for a new business and takes the financial risk of starting up and managing it

Business plan

a detailed written document outlining the purpose and aims of a business, which is often used to persuade lenders or investors to finance a business proposal.

Revenue

the amount a business earns from the sale of its products

Business start-up

a newly formed business that usually starts small, but some might grow to be much bigger

Sole trader

a business that is owned and controlled by just one person who takes all of the risks and recieves all of the profits

Start-up capital

the finance needed when first setting up a business

Partnership

a business formed by two or more people who will usually share responsibility for the day-to-day running of the business. Partners usually invest capital in the business and will share profits

Unincorporated business

a business that does not have legal identity separate for its owners. The owners have unlimited liability for business debts.

Unlimited liability

if an unincorporated business fails, then the owners might have to use their personal wealth to finance any business debts

Shareholder

a person or organisation who owns shares in a limited company

Private limited company

often a small to medium-sized company; owned by shareholders who have limited liability. The company can sell its shares to the general public.

Public limited company

often a large company; owned by shareholders who have limited liability. The company can sell its shares to the general public.

Ordinary shareholders

the owners of a limited company

Limited liability

the shareholders in a limited liability company which fails only risk losing the amount they have invested in the company, and not any of their personal wealth

Dividend

a payment, out of profits, to shareholders as a reward for their investment

Collateral

non-current assets offered as a security against borrowing

Franchise

a business system where entrepreneurs buy the right to use the name, logo and product of an existing business

Joint venture

two or more businesses agree to work together on a project and set up a separate business for this purpose

Public corporation

a business organisation that is owned and controlled by the state

Objective

a statement of a specific target to be achieved, and should be SMART (specific, measurable, achievable + agreed, realistic + relevant, and time-specific)

Market share

the proportion of sales one business has in comparison to the sales of the entire market

Corporate social responsibility (CSR)

businesses taking responsibility for the impact their activities might have on society and the environment

Pressure group

a group of like-minded people that puts pressure on businesses and government to change their policies to reach a predetermined objective.

Social enterprise

a business with social objectives that reinvests most of its profits back into the business or into benefiting society at large

Stakeholder

an individual or group which has an interest in a business because they are affected by its activities and decisions