1.1

• 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

  
• Factors of Production

  the four categories of resources that are used 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 product

  
• Specialisation

  people and business concentrate on what they are best at

  
• Goods


  tangible products that can be seen and touched and are sold to the consume such as food, computers

  
• Services

  non-tangible products, things other people do for you such as insurance services, transport

  
• Added Value

  the difference between the selling price of a product and the cost of raw materials used to make it

  
• Division of Labour

  It is when the production process is split up into different tasks and each worker performs one of these tasks. It is a form of specialization.

  
• Primary Sector

  It extracts and uses the natural resources of the earth to produce raw materials used by other businesses.

  
• Secondary Sector


  It manufactures goods using the raw materials provided by the primary sector

  
• Tertiary Sector

  It provides services to consumers and the other sectors of industry

  
• Chain of Production

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

  
• Mixed Economy

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

  
• Entrepreneur

  It is a person who organises, operates and takes the risk for a new business venture.

  
• Business Plan

  It is a document containing the business objectives and important details about the operations, finance and owners of the new business.

  
• Revenue

  The amount of money a business earns from the sale of its products

  
• Capital Employed

  It is the total value of capital used in the business

  
• Internal Growth

  It occurs when a business expands its existing operations

  
• External Growth

  It occurs when a business takes over or merges with another business. It is often called integration as one firm is integrated into another.

  
• Economies of Scale

  The reduction in average unit costs as a result of increasing the quantity of production

  
• Merger

  A merger is when the owners of two businesses agree to join their firms together to make one business.

  
• Takeover/Acquisition

  It is when one business buys out the owners of another business which then becomes part of the predator business.

  
• Horizontal Integration

  It is when one firm merges with or takes over another one in the same industry at the same stage of production.

  
• Vertical Integration

  It is when one firm merges with or takes over another one in the same industry but at a different stage of production. Vertical integration can be forward or backward.

  
• Conglomerate Integration

  It is when one firm merges with or takes over a firm in a completely different industry. It is also known as diversification.

  
• Sole Trader


  It is a business owned by one person.

  
• limited liability

  It means that the liability of shareholders in a company is only limited to the amount they invested.

  
• unlimited liability

  It means that the owners of a business can be held responsible for the debts of the business they own.

  
• Partnership

  Partnership is a form of business in which two or more people agree to jointly own a business.

  
• Shareholder

  A person or organisation who owns shares in a limited company

  
• Private Limited Company (Ltd)

  A small to medium sized company, owned by shareholders who have limited liability. The company cannot sell its shares to the general public.

  
• Dividend

  They are payments made to shareholders from the profits of a company.

  
• Unincorporated Business

  It is one that does not have a separate legal identity. Sole traders and partnerships are unincorporated businesses.

  
• Public Limited Company (Plc)


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

  
• Franchise


  It is a business based upon the use of the brand names, promotional logos and trading methods of an existing successful business.

  
• Joint Venture

  A joint venture is when two or more businesses agree to start a new project together sharing the capital, the risks and the profits.