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