The "Comprehensive IGCSE Business Studies Definitions Handbook" is an indispensable resource designed to support students, in mastering the fundamental concepts of business studies at the IGCSE level. It covers Section 1 of the IGCSE syllabus
Section 1 revision keywords and questions
Key terms Definition/answer/examples
A need is a good or service essential for living
Needs and 2 examples of needs
Example: - Water and Clothing
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.
Wants and 2 examples of wants
Examples: - Internet, Electronics
The economic problem – there exist unlimited wants but limited
resources to produce the goods and services to satisfy those
Scarcity/Economic Problem and wants. This creates scarcity.
2 examples of scarce resources
Two examples of scare resources are petrol and gold.
Opportunity cost is the next best alternative given up by choosing
another item.
Opportunity Cost and an
example
An Example would be Holiday or Car. If an individual chooses to
buy the holiday, so the car becomes the opportunity cost.
Specialisation occurs when people and businesses concentrate on
what they are best at.
An advantage of Specialisation is Workers are trained in one task
Specialisation and an advantage and specialise in this – this increases efficiency and output
and disadvantage
A disadvantage of Specialisation is Workers can become bored
doing just one job – efficiency might fall
Division of labour is when the production process is split up into
Division of Labour different tasks and each worker performs one of these tasks. It is a
form of specialisation.
Added value is the difference between the selling price of a product
and the cost of bought-in materials and components.
Two ways in which a business can add value is Increase selling
Added Value and 2 ways a
business can add value
price but keep the cost of materials the same OR Reduce the cost of
materials but keep the price the same.
The primary sector of industry extracts and uses the natural
resources of Earth to produce raw materials used by other
Primary Sector and 2 examples businesses.
Two examples could be farming and fishing.
,Classification: Internal
2
The secondary sector of industry manufactures goods using the
raw materials provided by the primary sector.
Secondary Sector and 2
examples
Two examples of the secondary sector could be bread baking and
car manufacturing.
The tertiary sector of industry provides services to consumers and
Tertiary Sector and 2 examples the other sectors of industry.
Two examples could baking and retailing.
Change in the relative De-industrialisation occurs when there is a decline in the
importance of the primary, importance of the secondary, manufacturing sector of industry in a
secondary and tertiary sector country.
Private sector – businesses not owned by the government. These
businesses will make their own decisions about what to
Private sector and their main aim produce,Most businesses in the private sector will aim to make a
profit.
Public sector – government (or state) owned and controlled
businesses and organisations. Some goods and services are
Public Sector and their main aim
provided free of charge to the consumer, such as state health and
education services.
A mixed economy has both a private sector and a public (state)
Mixed Economy
sector.
Entrepreneur Entrepreneur is a person who organises, operates and takes the
risk for a new business venture.
Benefits of being an entrepreneur are being able to choose how to
use time and money and able to put own ideas into practice
2 advantages and 2
disadvantages of being an
entrepreneur Disadvantages of being an entrepreneur is risk and limited capital
8 characteristics of a successful Hard working, Risk taker, Creative, Creative, Optimistic, Self-
entrepreneur confident, Innovative, Independent
,Classification: Internal
3
A business plan is a document containing the business objectives
Business plan
and important details about the operations, finance and owners of
the new business
-Business strategy
4 components of a business plan -Product and services
-Description of the business
-Organization structure and management
2 reasons why governments -To reduce unemployment
support start-up businesses -To benefit society
Finance: - Loans for small businesses at low interest rates
2 reasons how governments can Business idea and help: -Organising training for entrepreneurs that
support start-up businesses gives advice, and support sessions offered by experienced
business people.
» Number of people employed
Limitations: Some firms use production methods which employ
very few people but produce high output levels.
» value of output
Limitations: A high level of output does not mean that a business is
4 ways to measure the size of a large when using the other methods of measurement.
business and limitation of each » value of sales
one Limitations: It could be misleading to use this measure when
comparing the size of businesses that sell very different products
» value of capital employed.
Limitations: -A company employing many workers may use labour-
intensive methods of production. These give low output levels and
use little capital equipment.
» The possibility of higher profits for the owners.
» More status and prestige for the owners and managers
4 reasons why the owners of a » Lower average costs
business may want to grow » Larger share of its market
Horizontal integration is when one business merges with or takes
over another one in the same industry at the same stage of
production.
Horizontal integration and an
advantage and disadvantage Advantage » The merger reduces the number of competitors in the
industry» The combined business will have a bigger share of the
total market than either business before the integration.
Disadvantage »less flexibility.
, Classification: Internal
4
Vertical integration is when one business merges with or takes over
another one in the same industry but at a different stage of
production. Vertical integration can be forward or backward.
Vertical integration and an
advantage and disadvantage
Advantage » The profit margin made by the retailer is absorbed by
the expanded business
Disadvantage ». the process is time-consuming.
Diversification is when one business merges with or takes over a
business in a completely different industry.
Advantage » The business now has activities in more than one
Diversification and an advantage
and disadvantage
industry. This means that the business has diversified its activities,
and this will spread the risks taken by the business.
Disadvantage » It is complicated running two businesses side by
side. Different management styles
Problem » Larger business leads to poor communication
Solution »Use latest IT equipment and telecommunications – but
even these can cause problems.
2 problems associated with
Problem »Expansion costs so much that business is short of
business growth and how they
can be overcome finance
Solution». Expand more slowly – use profits from slowly expanding
business to pay for further growth.
» The type of industry the business operates in
2 reasons why a business may
remain small
» the market size
» the owners’ objectives.
» Lack of management skills
3 reasons why a business may
fail
» Changes in the business environment
» Over-expansion
Sole trader is a business owned by one person.
Sole trader and two advantages Advantage » freedom to choose his own holidays, hours of work,
and two disadvantages prices to be charged and whom to employ.
Advantage. » Don’t not have to give information about his business
to anyone
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller alvi. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $7.49. You're not tied to anything after your purchase.
