Barter and the Role of Money
What is Barter?
Barter is the exchange of goods and services without the use of money
Name one functional area of business
There are four departments that represent functional areas of business:
• Production Department
• Marketing Department
• Finance Department
• Human Resource Department
What is a sole trader?
A sole trader is a type of enterprise owned and run by one person and in which there is no legal distinction between the owner and the business entity.
Give one consequence of unethical and illegal practices in business
(a) misleading advertisements – unfair and fraudulent practice on the population; When you engage in false advertising, your consumers will perceive you as untrustworthy. Both the customers you already have and any potential new customers will tend to feel like you betrayed them and take their business elsewhere.
(b) withholding of tax – cheating the government of revenue; Tax evasion creates negative impacts on the economy and the welfare of society. One of the impacts is the fall in government revenue, which means less money for vital goods and services like healthcare and education for the population.
(c) unethical disposal of waste – pollution; and, Exposure to high levels of pollution can cause a variety of negative health outcomes. It increases the risk of infections, diseases and cancer. Also, this can lead to death of both humans and animals
Give one advantage of a Franchise
To the Franchisor
• It reduces their cost of operation • The established standards are maintained › • It increases their cash flow; payment for the ‘rights’ and royalties as the firm operates
To the Franchisee
• They can start a business that is already established • It increases their market share • Their advertising cost is reduced • Training for staff borne by parent company
Give two characteristics of barter
a. Double coincidence of wants I have what you want. You have what I want.
b. Rate of exchange The value of my good/service versus yours
c. Indivisibility Cannot be broken down into smaller parts
d. Store of value Some goods are perishable
e. Sense of interdependence You produce what I need. I produce what you need
Who is a Stakeholder?
A stakeholder is a party that has an interest in a company and can either affect or be affected by the business. The primary stakeholders in a typical corporation are its investors, employees, customers, and suppliers. The firm has various obligations to in stakeholders
What is a sector of the economy?
A sector is an area of the economy in which businesses share the same or related business activity, product, or service.
Give 2 examples of unethical/illegal behaviour
• Ensuring that the business is a real business or establishment and not using it as a front for money laundering and other illicit/illegal activities, such as selling drugs.
• Ensuring that capital is legally obtained and not tainted with illegal operations as the source of funding, such as raising money from selling drugs, printing fake money or scamming customers.
• In the operations of a business, payment of national insurance contributions and taxes
• Hiring workers for less than minimum wage due to their desperation to work.
• Threatening employees with termination if they report higher up staff for poor treatment or illegal activities.
• Bribing politicians to get government contracts. • False advertising
What is the Role of the HR Department?
The HR (Human Resources) department is a group who is responsible for managing the employee of a business (i.e., recruiting, hiring, training, and firing employees) and administering employee benefits.
Give one advantage of Barter
• Specialization of labour Different from a subsistence economy (A subsistence economy is one where a person produces items for their own use)
• Output increased Productivity is increased through repetition Higher quality products produced due to creating them over a period of time.
• Decreases wastage Excess goods can be traded instead of disposed Ability to get what you need with what you already own. No need to go acquire other items to obtain/purchase goods
Name 3 objectives of a Customer
High-quality goods Customers want to know that the goods they are purchasing are of high quality and do not pose health or other risks to them. This means that they expect, for example, goods to be durable, fresh (food), and well crafted.
Fair prices Customers want to know that when they purchase a product, they get their money’s worth. No one likes to know that they overpaid for an item.
Good service Customers want good service when they purchase a product. This means for example, meeting friendly staff, having their questions answered and being able to return damaged products
Innovation Customers want companies to improve their products over time, and not settle for what they have. This means adding new features, flavours and designs.
Give 2 advantages of a Partnership
Personal unlimited liability
Decision-making can be slower because of the number of partners
A decision made by one partner is binding on the rest of the partners
Disagreement among partners
Insufficient capital; this hinders growth and expansion
Profits are shared among partners
What are Business Ethics?
Business ethics refers to the written and unwritten principles and values that govern decisions and actions within companies. They are the moral principles that act as guidelines for the way a business conducts itself and its transactions.
What is the Role or Function of a Shareholder
Shareholders provide capital to the business by purchasing shares. The company can then use the money raised from selling shares to purchase raw materials or hire more employees
Shareholders purchase a part or shares in a business as in investment. They do this as this allows them to earn a percentage of the business' profits in the form of dividends. The more profits the business makes, the greater their share in dividends.
Shareholders can sometimes vote on decisions the business makes
What is Fiat Money?
This is referred to as Legal Tender. The notes and coins had no intrinsic value. The value of the notes and coins came from the law stating what the value was
What is the role of the Marketing Department?
A marketing department drives the promotional engine of a business. It is responsible for increasing brand awareness overall, while also driving potential and recurring customers to a company's products or services.
Give 4 advantages of a Public Limited Company
• It is a separate legal entity
•Limited liability for business debts
• Continuity
• Shares can be easily bought and sold
• Has access to more capital as shares can be sold on the open market
• Enjoys the benefits of economies of scale
What is a Code of Ethics?
A code of ethics in business is a set of guiding principles intended to ensure a business and its employees act with honesty and integrity in their day-to-day operations and to only engage in acts that promote a benefit to society.
What is a cooperative?
Cooperatives are people-centred enterprises owned, controlled and run by and for their members to realise their common economic, social, and cultural needs and aspirations. Cooperatives bring people together in a democratic and equal way
What's the difference between the Subsistence Economy and the Barter Economy?
In the SUBSISTENCE ECONOMY, a person would only produce enough to satisfy their own basic needs. Nothing extra was produced and therefore there was nothing available to trade.
However, in the BARTER ECONOMY, as production increases, persons start having extra (surplus). Persons would engage in barter to trade excess goods for the goods of others that they wanted.
Name 5 Stakeholders in Business
Employers
Employees
Customers
Suppliers
Owners
Government
What is the difference between a franchisor and a franchisee?
A franchisor is a person or company that grants a license to a third party (known as the franchisee) to open a business under the franchisor’s brand name and trademarks.
The franchisor retains all of the rights to the usually well-known brand name. But they lease or lend the ability to use those rights and trademarks to the franchisee for a fee.
Why are Business Ethics important? Give 5 reasons
1. They improve the image of the firm. A firm that is known for being ethical and operating in conformance with the laws will be viewed by society as a great example of how a business should be run and would therefore have a good public image.
2. They can lead to an increased market share. Customers will likely want to shop at a business that not only provides them with value goods and services at a fair price, but also does not engage in any illegal or unethical practices. Generally, person tend not to want to associate themselves with businesses that engage in shady activity.
3. They can lead to increased sales. As stated above, customers will likely want to shop at an ethical business. More customers leads to more sales which leads to more revenue.
4. The firm's profit margin will increase. By having an increase in sales, and revenue, the profits of a business is likely to increase.
5. They will create a better society. By setting an example of how to operate, staff will learn ethical traits, and other business will also likely try to emulate a business’ success by also carrying out ethical practices in their business. This can result in society having more ethical businesses and workers, which will benefit society as a whole.
6. They are necessary for the survival of the firm. An unethical business can likely lose customers and staff due to the poor practices it may engage in. For example, if staff believe that the working environment of the business are unsafe and that the business does not care about their wellbeing, they may be more inclined to leave and find employment elsewhere. Also, customers may not want to shop at a business that is known for its unethical practices. Therefore, unethical practice can cause a business to die.
7. Some unethical practices are punishable by law. Unethical practices such as dumping of waste and hiring staff below the minimum wage are illegal and publishable by law. Businesses can suffer heavy fines and upper staff can also face imprisonment in some cases.
8. They attract staff. Generally, workers want to work in a business that has ethical practices as stated above
Give an example of past "money" that had intrinsic value
The use metals like gold and silver to trade for other goods