Key Definition

• Needs


  Products which we cannot live without, essential for life such as food, water, shelter and clothing
• Wants


  Non-essential products, which we may like to have, but are not necessary for life, such as a mobile phone or games consol
• Scarcity


  Shortage of a resource where demand is greater than supply due to limited factors of production available
• Opportunity cost


  The next best alternative forgone, what you give up when you make a choice to do or have something else
• Specialisation


  When an individual, business, region or country focuses on producing a limited range of specific goods or services
• Added value


  The additional worth or value created during the production process, customers are willing to pay more for a product than the costs involved in creating the product
• Primary sector


  Businesses involved in the extraction of raw materials from the Earth, including agriculture, fishing, forestry and mining
• Secondary sector


  Transforming raw materials into finished goods (physical/tangible products), including motor manufacturing, food processing, construction, electronics manufacturing, oil refining, clothing and textiles, and the petrochemical industry
• Tertiary sector


  Provision of services (non-physical/non-tangible products) such as transport and distribution, retailing, banking, insurance, law, education, health care, tourism, media and entertainment, communications
• Private sector


  Individuals and groups who own and run businesses, often with the aim to make a profit, including sole traders, partnerships, private and public limited companies, social enterprises and charities
• Public sector


  Owned and controlled by the government, often includes public health care, state schools, the armed forces, police, public transport and roads
• Mixed economy


  Made up of both private and public sector enterprises
• Entrepreneurs


  Someone who sets up and runs their own business, often involving some element of risk or uncertainty
• Business plan


  A written document which outlines a business's aims and vision (plan for the future)
• Grants


  A source of finance given to a business which has no interest and does not have to be repaid, but usually comes with certain conditions
• Training schemes


  Provide workers with skills and qualifications to enable them to gain employment and provide workers with the skills needed by business
• Sole traders


  An unincorporated business owned by one person
• Partnership


  An unincorporated business that has two or more owners
• Private limited company (Ltd)


  A registered incorporated business that has a separate legal identity, limited liability and is owned by shareholders, but shares may only be traded privately
• Public limited company (Plc)

  A registered incorporated business that has a separate legal identity, limited liability and is owned by shareholders, shares are listed on the stock market and may be traded publicly
• Franchise


  An arrangement where an established business allows another business or individual to use their name, products and logo in return to a fee or royalties (a share of sales or profits)
• Joint venture


  An agreement between two businesses to work together on a particular project, sharing the cost and profits, and making decision together
• Unincorporated business


  Businesses which are not registered as companies and do not have a separate legal identify from their owners or limited liability (sole traders and partnerships)
• Limited company


  Legally registered businesses which have a separate legal identify from their owners and limited liability
• Limited liability


  Means that the owners of the business only risk the money that they have invested in the business and any other personal assets are safe
• Public corporation


  Owned and controlled by the state (government) and part of the public sector
• Business objectives


  A goal or target that a business wants to achieve to reach its overall aims
• Profit


  The money left over after all costs have been deducted from income or sales revenue, Profit = Sales Revenue – total costs
• Market share


  The sales a firm makes as a percentage of the sales of all firms in a particular market
• Social enterprise


  A business which seeks to use its income and plan its activities to achieve social or environmental aims rather than to simply make a profit for owners
• Stakeholder


  Any individual or groups who has an interest in what a business does and how it does it, including owners, employees, customers, suppliers, local community, trade unions, pressure groups and government