Why Do Business Exist Essay

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

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.

Demand and Supply

Key Terms

The Supply Curve: gives the relationship between price and quantity supplied when shown on a graph. It is usually upward sloping to the right because higher prices provide a greater insensitive to produce.

The Equilibrium price: is the price at which the amount buyers demand and the amount seller’s supply is exactly the same.

The Market Clears: when there are no unsold stocks and no customer unable to obtain the product.

Key Terms

Value: How much something is worth.

Added Value: Is the difference between the price, which is charged, and the total cost of material inputs of the product.

Value Chains: Are value adding activities that form a sequence. Each activity can be subdivided into many more value chains that will