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IGCSE Business CH 1 & 2
Terms in this set (32)
An organisation which produces goods and services.
A need is a good or service essential for living.
A want is a good or service which people would like to have, but which is not essential for living. People's wants are unlimited.
5. Economic problem
There exist unlimited wants but limited resources to produce the goods and services to satisfy those wants, this creates scarcity.
Scarcity is the lack of sufficient products to fulfill the total wants of the population.
7. Factors of production
Factors of production are those resources needed to produce goods or services. There are four factors of production and they are in limited supply.
8. (factor of production) Land
Land is the term used to cover all of the natural resources provided by nature and includes fields, forests, oil, gas, metals and other resources.
9. (factor of production) Labour
Labour is the term used to describe the number of people available to make products.
10. (factor of production) Capital
Capital is the finance, machinery and equipment needed for the manufacture of goods.
11. (factor of production) Enterprise
Enterprise is the skill, and risk-taking ability of the person who brings the factors of production together to produce a good or a service. For example, the owner of a business. These people are called entrepreneurs.
12. Opportunity cost
Opportunity cost is the next best alternative given up by choosing another item.
Specialisation occurs when people and businesses concentrate on what they are best at.
14. Why specialisation is common
•Specialized machinery and technology are widely available
•Increasing competition means businesses have to have low cost
•Higher living standards can result from being specialized
15. Division of labour
Division of labour is when the production process is split up into different tasks and each worker performs one of these tasks. It is a form of specialisation.
16. Advantages of division of labour and job specialization
•Workers are trained in one task and specialize in this-Increases efficiency
•Less time is wasted moving from one workbench to another
17. Disadvantages of division of labour and job specialization
•Workers can become bored doing just one job-efficiency might fall
•If a worker is absent no one else can do the job- production might be stopped
•Products become standardized
•Small businesses can't compete
18. Added value
Added value is the difference between the selling price of a product and the cost of bought in materials and components.
19. How to increase added value
-Increase selling price but keep the costs the same, to do this you need to have a good image of your product
-Reduce cost but keep selling price the same, this might decrease the quality
21. Primary sector
The primary sector of industry extracts and uses the natural resources of the earth to produce raw materials used by other businesses
22. Secondary sector
The secondary sector of industry manufactures goods using raw materials provided by the primary sector.
23. Tertiary sector
The tertiary sector of industry provides services to consumers and the other sectors of industry.
The growing importance of the secondary sector in developing countries
25. Advantages of industrialization
•National output increases which increases average living standard
•Increasing output can result in lower imports and higher exports
•Tax money increases
•Value is added to the country's raw materials
26. Disadvantages of industrialization
•More people move to the city which causes housing and social problems
•Expansion on manufacturing may make it difficult for businesses to recruit and maintain staff •Business import costs will increase
•Pollution from factories add to the countries environmental problems
•multinational companies will comparative with the small businesses
De-industrialisation occurs when there is a decline in the importance of the secondary, manufacturing sector of industry in a country.
28. Disadvantages of deindustrialization
•Increase in competition for businesses
•Structural unemployment- some people don't have the skills to work in the tertiary sector so the become unemployed
29. Advantages of de-industrialization
•Income and living standards of the citizens increase
30. Why does de-industrialization happen
-Sources of primary products become depleted
-Most developed countries can't compete in manufacturing against newly industrialized countries
-As the country's total wealth increases and living standards rise, more people spend more money on travel and restaurants than on manufactured products
31. Mixed economy
A mixed economy has both a private sector and a public sector.
32. Private sector
Businesses not owned by the government. Services are charged and paid for by the customer
33. Public sector
Government owned and controlled businesses and organisations. Services provided are free and are paid for by taxes.
When governments sell public sector businesses to private sector businesses
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