Core Economic Concepts

Core Economic Concepts

• A need is a good or service essential for survival.
• A want is a good or service desired but not essential, and human wants are unlimited.
• The economic problem arises from unlimited wants and limited resources, creating scarcity.
• Factors of production are the limited resources, including labor, capital, land and entrepreneurship, required to produce goods and services.
• Scarcity reflects insufficient products to meet the population's total wants.
• Opportunity cost is the value of the next best alternative forgone when making a choice.
• Specialization is when individuals or businesses concentrate on producing specific goods or services they are best at.
• Division of labor divides production into separate tasks performed by different workers; is a form of specialization.
• Businesses combine factors of production to create goods and services that satisfy wants.
• Added value is the difference between a product's selling price and the cost of its components.

Sectors of Industry and De-industrialization

• The primary sector extracts and utilizes Earth's natural resources, providing raw materials.
• The secondary sector manufactures goods using raw materials from the primary sector.
• The tertiary sector provides services to consumers and other industries.
• De-industrialization is when there is a decline in the secondary sector's significance within a country.

Economic Systems and Business Ownership

• A mixed economy combines private and public sectors.
• Capital is the money invested in a business by its owners.
• An entrepreneur organizes, operates, and assumes the risk for a new business.
• Capital employed is the total capital value used in a business.
• Internal growth occurs when a business expands its existing operations.
• External growth occurs when a business merges with or is taken over by another business, also known as integration.
• A takeover or acquisition is when one business buys out the owners of another, integrating it into the acquiring business.
• A merger is when owners of two businesses agree to combine their operations into one.
• Horizontal integration is when a business merges with or takes over another in the same industry and production stage.
• Vertical integration is when a business merges with or takes over another in the same industry but at a different production stage, and can be forward or backward.
• Conglomerate integration occurs when a business merges with or takes over another in a completely different industry, this is also called diversification.
• A sole trader is a business owned by one person
• Limited liability restricts shareholders' liability to the amount of their investment.
• Unlimited liability means business owners are responsible for business debts, even with personal assets.
• A partnership involves two or more people agreeing to jointly own a business.
• Unincorporated businesses lack a separate legal identity, which includes sole traders and partnerships.
• Incorporated businesses have a separate legal status from their owners.
• Shareholders own a limited company by buying shares that represent partial ownership.
• Private limited companies are shareholder-owned but cannot sell shares to the public.
• Public limited companies are shareholder-owned and can trade shares on the stock exchange.
• Dividends are payments to shareholders from a company's after-tax profits.
• A franchise is a business using the brand, logos, and methods of an existing successful business.
• The franchisee obtains a license to operate from the franchisor.
• A joint venture involves two or more businesses collaborating on a new project, sharing capital, risks, and profits.

Business Objectives and Social Responsibility

• A public corporation is a state-owned and controlled business in the public sector.
• Business objectives are the targets a business aims to achieve.
• Profit is a business's total income (revenue) minus total costs.
• Market share is the percentage of total market sales held by one brand or business.
• A social enterprise has social objectives along with profit-making goals, with reinvestment back into the business.
• A stakeholder is anyone with a direct interest in a business's performance and activities.

Motivation and Payment Systems in the Workplace

• Motivation drives employees to work hard and effectively for the business.
• A wage is a payment for work, typically paid weekly.
• Time rate is payment based on the hours worked.
• Piece rate is payment based on the number of units produced.
• A salary is payment for work, typically paid monthly.
• A bonus is extra payment beyond basic pay for good performance.
• Commission is payment related to the volume of sales made.
• Profit sharing distributes a portion of company profits to employees.
• Job satisfaction is the enjoyment found in doing a good job.
• Job rotation involves periodically switching tasks to alleviate monotony.
• Job enrichment involves adding more challenging tasks and responsibilities to a job.
• Team-working involves using groups of workers and allocating specific tasks and responsibilities to them.
• Training improves a worker's skills.
• Promotion is advancement to a higher job or managerial level within an organization.
• Organizational structure defines management levels and division of responsibilities.
• An organizational chart diagrams the internal management structure.
• Hierarchy refers to the management levels in an organization, from highest to lowest.
• A level of hierarchy is the ranking of managers, supervisors, or employees with similar responsibility.
• Chain of command is the structure through which instructions pass from senior to lower management levels.
• Span of control is the number of subordinates managed directly by one manager.

Management Roles and Leadership

• Directors are senior managers who lead a department or division of a business.
• Line managers hold direct responsibility for subordinates in the organizational hierarchy.
• Supervisors are junior managers who have direct control over employees below them.
• Staff managers are specialists providing support, information, and assistance to line managers.
• Delegation is granting a subordinate the authority to perform specific tasks.
• Leadership styles include autocratic, democratic, and laissez-faire approaches to managing people and making decisions.
• Autocratic leadership means the manager expects to be in charge and have orders followed.
• Democratic leadership involves other employees in decision-making.
• Laissez-faire leadership defines broad objectives but allows employees to make their own decisions.

Recruitment and Training

• Recruitment is the process of attracting candidates to apply for a job.
• Job analysis identifies and records job-related responsibilities and tasks.
• A job description outlines the responsibilities and duties of a specific job.
• Job specification details the requirements, qualifications, and expertise for a job.
• Internal recruitment fills a vacancy using an existing employee.
• External recruitment fills a vacancy with someone new to the business.
• Induction training introduces a new employee to the business's activities, customs, and procedures.
• On-the-job training involves learning by watching an experienced worker.
• Off-the-job training involves being trained away from the workplace by specialist trainers.
• Workforce planning establishes the number and skills of employees needed for the future.
• Dismissal is when employment is ended against the employee's will, usually for violating the employment contract.
• Redundancy is job loss due to the position no longer being needed, not due to unsatisfactory work.
• A contract of employment is a legal agreement between employer and employee, outlining rights and responsibilities.

Communication

• Communication is transferring a message from sender to receiver with understanding.
• A message is the information or instructions communicated.
• Internal communication occurs between members of the same organization.
• External communication is between the organization and outside entities.
• The transmitter or sender initiates communication.
• The medium of communication is the method used to send a message.
• The receiver is the recipient of the message.
• Feedback confirms message receipt, understanding, and action if needed.
• One-way communication does not solicit a response.
• Two-way communication involves a response and discussion.
• Formal communication uses established channels and professional language.
• Informal communication is casual and uses everyday language.
• Communication barriers hinder effective message delivery.