Business test

Business activity: the process of producing goods and services to satisfy consumer demand.

Need: a good or service which is required to survive

Want: A good or service which people would like, but is not a requirement to survive

Economic problem: unlimited wants cannot be met because there are limited factors of production.This creates scarcity. 

Factors of production: the resources needed to produce good and services

What are the factors of production: Land (all natural resources), Labour (the number of people available to work), Capital (machinery, equipment, and finance needed for production of goods and services), and Enterprise (the people prepared to take the risk of setting up the businesses).

Scarcity: there aren't enough goods and services to meet the wants of the population

Opportunity cost: The cost of giving up one opportunity in order to take another one. 

Specialization: People and businesses concentrate on what they are best at.

Benefits of specialization: Increases efficiency, reduces the cost of production, benefits the customer 

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

Advantages of division of labor: increases efficiency and output, quicker and cheaper, less to be taught. 

Disadvantages of division of labor: efficiency might fail, and the production might be stopped. 
Consumer goods: Goods made for use by other businesses 

Consumer services: non-tangible products such as transport. 

Capital goods: Physical goods made to be used by other businesses. 

Semi-finished goods: Goods that are processed from raw materials and are used in manufacturing of finished goods. 

Personal services: Activities which provide services of personal nature (example doctors). 

Community services: Services provided by the government (example water and trash removal). 

Commercial services: Activities involved in getting goods to consumers (example insurance and advertising). 

Added value: increased utility of a product as it passes through different productions stages 

Primary sector:All industries that extract natural resources so that they can be used to be processed

Secondary sector: business activity taking the natural resources produced by the primary sector processed and manufactured into finished goods. 

Tertiary sector: providing services to consumers and other business

Chain of production: the change between primary, secondary, and tertiary. 

Industrialization: the growing importance of secondary sector business activity and the reduced importance of the primary sector business activity. The emerging economies of both China and India are good examples.

De-industrialisation: the growing importance of the tertiary sector and the reduced importance of the secondary sector. The UK and the USA are good examples of this type of economic activity. 

A developing country (LDC), often has a small industrial sector and a lower standard of living compared to other countries.

A developed country (MDC)

Developing countries reduce their primary sector activities and increase their secondary sector activities. 

A change in consumer behavior is a result of both industrialisation and de-industrialization 

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

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

Public sector: services that are provided by the government.

Market Economy: business and industry that are managed by individuals and private enterprise. 

Command Economy: government tells business what and how much to be produced 

(Communism)