CIE IGCSE Business Studies Glossary
Section 1: Understanding Business Activity
Need
A good or service that is essential for living.
Want
A good or service that people would like to have but is not necessary for living. People
have unlimited wants.
Economic problem
There are unlimited wants but limited resources to produce the goods and services to
satisfy wants. This creates scarcity.
Factors of production
Resources needed to produce goods and services. There are 4 factors of production (land,
labour, capital, enterprise) and they are limited in supply.
Scarcity
The lack of sufficient products to fulfil the total wants of the population.
Opportunity Cost
The next best alternative given up by choosing another item.
Specialization
When people and businesses concentrate on what they are best at.
Division of labour
When the production process is split up into different tasks and each worker performs one
of these tasks. It is a form of specialization.
Business
Combines factors of production to make products (goods and services) which satisfy
people's wants.
Added Value
It is the difference between the selling price of a product and the cost of bought in
materials and components.
Primary Sector
Extracts and uses natural resources to produce raw materials used by other businesses.
Secondary Sector
Manufactures goods using raw materials provided by Primary Sector.
Tertiary Sector
Provides services to customers and other sectors of industry.
De-industrialization
There is a decline in the importance of the secondary, manufacturing sector of industry in
a country.
, Mixed Economy
Has both a private sector and a public sector.
Private Sector
Businesses not owned by government. Make their own decision about selling price. Aim
to run profitably. Some government control.
Public Sector
Government-owned, controlled businesses and organizations. Decide which price to
charge consumers. Different aim from Private Sector.
Capital
Money invested into business by owners.
Entrepreneur
A person who organizes, operates and takes the risk for a new business venture.
Business Plan
Document containing the business objectives and important details about the operations,
finance and owners of the new businesses.
Capital Employed
Total value of capital used in the business.
Internal Growth
When a business expands its existing operations.
External Growth
When a business takes over or merges with another business.
Integrations/Merger
When two businesses agree to join their firms together to make one business.
Takeover/Acquisition
One business buys out the owners of another business which then becomes part of the
'predator' business
Horizontal Integration
When one company merges with or takes over another in the same industry in the same
stage of production.
Vertical Integration
When one company merges with or takes over another in the same industry but at a
different stage of production.
Conglomerate Integration/Diversification
When one company merges with or takes over another in a completely different industry.
Sole Trader
Business owned by one person
Limited Liability
The liability of shareholders in a company is only limited to the amount they invested.
Unlimited Liability
The owners of a business can be held responsible for the debts of the business they own.
Their liability is not limited to the investment they make.
Partnership
A form of business in which two or more people agree to jointly own a business.
Section 1: Understanding Business Activity
Need
A good or service that is essential for living.
Want
A good or service that people would like to have but is not necessary for living. People
have unlimited wants.
Economic problem
There are unlimited wants but limited resources to produce the goods and services to
satisfy wants. This creates scarcity.
Factors of production
Resources needed to produce goods and services. There are 4 factors of production (land,
labour, capital, enterprise) and they are limited in supply.
Scarcity
The lack of sufficient products to fulfil the total wants of the population.
Opportunity Cost
The next best alternative given up by choosing another item.
Specialization
When people and businesses concentrate on what they are best at.
Division of labour
When the production process is split up into different tasks and each worker performs one
of these tasks. It is a form of specialization.
Business
Combines factors of production to make products (goods and services) which satisfy
people's wants.
Added Value
It is the difference between the selling price of a product and the cost of bought in
materials and components.
Primary Sector
Extracts and uses natural resources to produce raw materials used by other businesses.
Secondary Sector
Manufactures goods using raw materials provided by Primary Sector.
Tertiary Sector
Provides services to customers and other sectors of industry.
De-industrialization
There is a decline in the importance of the secondary, manufacturing sector of industry in
a country.
, Mixed Economy
Has both a private sector and a public sector.
Private Sector
Businesses not owned by government. Make their own decision about selling price. Aim
to run profitably. Some government control.
Public Sector
Government-owned, controlled businesses and organizations. Decide which price to
charge consumers. Different aim from Private Sector.
Capital
Money invested into business by owners.
Entrepreneur
A person who organizes, operates and takes the risk for a new business venture.
Business Plan
Document containing the business objectives and important details about the operations,
finance and owners of the new businesses.
Capital Employed
Total value of capital used in the business.
Internal Growth
When a business expands its existing operations.
External Growth
When a business takes over or merges with another business.
Integrations/Merger
When two businesses agree to join their firms together to make one business.
Takeover/Acquisition
One business buys out the owners of another business which then becomes part of the
'predator' business
Horizontal Integration
When one company merges with or takes over another in the same industry in the same
stage of production.
Vertical Integration
When one company merges with or takes over another in the same industry but at a
different stage of production.
Conglomerate Integration/Diversification
When one company merges with or takes over another in a completely different industry.
Sole Trader
Business owned by one person
Limited Liability
The liability of shareholders in a company is only limited to the amount they invested.
Unlimited Liability
The owners of a business can be held responsible for the debts of the business they own.
Their liability is not limited to the investment they make.
Partnership
A form of business in which two or more people agree to jointly own a business.
