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Why Businesses Exist

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Introduction

Why Businesses Exist A business gets started when somebody decide that they can earn a profit by making a good or providing a service and selling it to people who are willing to pay for it. All Businesses have the same Main Objective An objective is anything that the business wants to achieve. The most important objective is to make a profit in order to survive. If a business does not make a profit it will go bankrupt and have to closedown. The Public Sector Owned by the Government: Army, Police, Schools and Hospitals. These are benefits for everyone. The Private Sector Owned by Private Individuals. Of Benefit to the people who own them. Key Terms Entrepreneurship: means being prepared to take risks and having the flair and skills needed to set up and run a business or other organization. Sole Owner: is an individual who runs a business and is personally responsible for any losses incurred. A Limited Company: is an organisation, which gives its owners or shareholders protection so that they can lose only the money that they have already put in. ...read more.

Middle

Reward Revenue - Cost = Profit Profit is the difference between a firm's revenues from its trading activities and its total costs. It is a reward for the risk and a return on capital invested. There are 3 factors of production: * Land * Capital * Labour Entrepreneurs use these 3 factors to make a profit. Sole Traders Company Legal No legal formalities. A legal structure with a separate identity from those who run it. Profit Requires all profits (Go straight to owner). Profits go to shareholders when costs have been met. Liability Unlimited Liability Personally responsible for all losses Limited Liability Only liable for money that they have put into the company. Capital Only raise capital from own resources such as loans. Selling shares can raise capital. The shareholders are known as equity Flexibility Free to change direction if necessary. Decisions taken by board of directors and shareholders. The Basic Economic Problem Resources are finite, desires are infinite, and thus we must make choices. The real value of what you buy is the sacrifice of what you don't buy. ...read more.

Conclusion

It can only occur when people are in a position to trade. Exchange: refers to the process of getting the things you need by offering someone your product and taking the orders in exchange. Money makes the process of exchange much easier. The Division Of Labour: refers to the practice of organising workers so that individuals specialise in one part of a product process. It generally leads to an increase in output per person. The Contradiction between Specialisation and Motivation Specialisation has enabled society to develop faster. However, if a worker specialises in a certain area for too long then the motivation of the worker will decrease. If a worker has a wider work range then the motivation to finish jobs will rise. If the worker has a greater responsibility then the motivation will increase because there are less repetitive tasks. Key Terms Primary Sector: includes industries involved in mining, fishing and farming. Secondary Sector: includes all manufacturing industries. Tertiary Sector: includes all service industries. Quaternary Sector: includes all finance and insurance. Trade Unions Developed to protect the rights of workers. By working collectively, members of a union have more power to negotiate than they do as individuals. ...read more.

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