Business Studies IGCSE-Chapter 1 - 3
Revenue
The amount a business earns from the sale of its products
Features of businesses
combines scare factors, produce goods and services, and employs people
Business plan
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
Privatisation
governments sell public sector firms to private individuals.
Mixed economy
has both a private sector and a public sector
Businesses in the public sector
health, education, defence, public transport, water supply and electricity supply
Reward/payment for capital
interest
Chef, and waitress at Legend Heights, are examples of
labour
Privatisation disadvantages
more workers might be unemployed since the private sector businesses have to cut the costs private sector businesses are less likely to focus on social objectives
Reward/payment for labour
wages
Advantages of Specialization
workers are trained on one task and less time is wasted
Disadvantages of Specialization
workers become bored doing one job and if a worker is absent and no one can do the job, production might be stopped
Land
All natural resources by nature, ex. fields, forest, oil, gas, metal, coal and other mineral resources
Private sector
Businesses owned by private individuals.
Public sector
Businesses owned by the government or state
Ovens, fryers, furniture, stock of raw materials such as chips, buns, buildings, and cash, at McDonalds, are all examples of
Capital
Methods of measuring size
Capital employed, value of output, number of employees, and market share
Businesses
Combine factors of production to make products (goods and services) which satisfy people's wants (purpose of business activity)
De-industrialisation
Decline in the importance of the secondary manufacturing sector of industry in a country
Contents of a busines plan
Description of the business, the business opportunity, the market, the objectives of the business, and financial forecast
Limitations of methods used to measure business size
Different methods may give a different size.
Primary Sector
Extracts, uses and sells raw materials, ex. woodcutter
Relative importance of economic sectors
percentage of the country's total number of workers employed in each sector value of output of goods and services and the proportion this is of total national output
Privatisation advantages
private sector businesses are more efficient since the main objective of theirs is profit and therefore costs must be controlled more capital can be invested in the business than the government can afford
Need
Goods or services essential for living
Want
Goods or services which people would like to have, but which is not essential for living (Unlimited)
How to Add Value
Increase selling price and reduce cost of materials
Reward/payment for land
Rent
Factor of production
Resources needed to produce goods or services
Tertiary sector
Sells products and provides services to consumers, ex. retailer
Enterprise
Skill and risk-taking ability of entrepreneurs
Organisation in the private sector
Sole trader, partnership, limited companies, franchises, joint ventures, and social enterprises.
Entrepreneurs
Someone who organises, operates and takes risks in a new business venture.
Added value
The difference between selling price and cost of materials
Reasons for de-industrialisation
1.natural resources for secondary sector become depleted 2.most developed economies are losing competitiveness in manufacturing to the newly industrialized countries 3.as a country's total wealth increases and living standards rise, consumers tend to spend a higher proportion of their incomes on service such as travel and restaurants than on manufactured products from primary products
Reasons government support/encourage new start-up businesses
Job creation, greater consumer choice, greater competition, provision of specialist goods and services, that larger businesses sometimes are less intereted in supplying, and small businesses can grow to become the larger businesses in the future.
Secondary sector
Manufactures goods using raw materials, ex. furniture maker
Specialization
People and businesses concentrate on what they are best at
Division of labour
Production is divided into different tasks and each worker performers specific tasks
Capital
The finance, machinery and equipments needed to manufacture goods
Industrialization
The growing importance of secondary business activity and the reduced importance of primary sector business activity
Scarcity
The lack of sufficient resources to fulfil population's wants
Capital
The money invested into a business by the owners
Opportunity cost
The next best alternative given up by choosing another item
Labour
The number of people hired to make products
Chain of production
The production and supply of goods to the final consumer that involves activities from primary, secondary, and tertiary sector
Sectors of Production
The three stages a product passes through before reaching the consumer.
Economic problem
There exist unlimited wants but limited resources to produce the goods or services to satisfy those wants. (Scarcity)
Profit
Total revenue - total costs