Busines part 2

• A Need


  A good or service essential for living.
• A want


  A good or service that people would like to have, but which is not essential for living.
• Economic problem

  Unlimited wants but limited resources - this creates scarcity.
• Scarcity

  Lack of sufficient products to satisfy total wants of population.
• Opportunity Costs

  The next best item given up by choosing another.
• Factors of production

  Resources needed to produce goods and services - land, labour, capital and enterprise
• Business


  An organisation that combines factors of production to make goods and services to satisfy people's wants and needs.
• Specialisation

  People and business concentrate on what they are best at.
• Division of labour

  Production is split into seperate tasks each worker specialises in one task
• Added Value


  The difference between a product's selling price and the cost of bought in materials.
• Primary sector

  Businesses that extract and use natural resources to produce raw materials.
• Secondary sector


  Businesses that manufactures goods using raw materials provided by primary sector.
• Tertiary sector

  Businesses that provide services to consumers and other firms.
• Deindustrialisation


  Decline in the importance of secondary, manufacturing industry.
• Mixed economy

  This has both private sector businesses and public sector businesses.
• Private sector

  Businesses owned by people, not the goverment/state.
• Public sector

  Businesses owned by goverment/state.
• Privatisation


  The sale of public sector business to private sector.
• Entrepreneur

  Someone who organises, operates and takes the risk for a new business venture.
• Business plan

  The objectives and details of the operations, finance and owners of a new business.
• Capital employed

  The total value of capital used in a business.
• Internal Growth

  The business expands its existing operations.
• External Growth

  The business expands by merging with or taking over another business.
• Takeover


  A business buys out the owners of another business.
• Merger


  The owners of businesses agree to join their firms together to form one business.
• Horizontal integration

  The business integrates with another in the same industry at the same stage of production.
• Vertical integration

  The business integrates with another in the same industry but at a different stage of production - towards suppliers is backward vertical integration and towards the market/customer is forward vertical integration.
• Conglomerate integration

  The business integrates with another but in a different industry.
• Soletrader

  The business is owned by one person.
• Partnership


  The business is jointly owned by two or more people.
• Limited liability


  The liability of owners/shareholders is limited to the amount invested. Personal posessions are not at risk.
• Incorporated business


  A business with seperate legal identity from its owners.
• Unincorporated business

  A business without seperate legal identity from its owners.
• Private limited company

  A business owned by shareholders but it cannot sell shares to the public.
• Public limited company

  A business owned by shareholders but it can sell shares to the public and its shares are tradable on Stock Exchange.
• Shareholders


  The owners of a limited company.
• Dividends

  Payments made to shareholders from profits (after tax) of a company.
• Franchise

  A business that uses, under license, the brand name, logo and trading methods of an existing business. The franchisor sells the license; the franchisee buys the licence.
• Joint venture

  Two or more businesses start a new project together sharing capital, risks and profits.
• Public corporation

  The business, in the public sector that is owned and controlled by the state/goverment.