Economic Basics & Types of
Business Ownership
Unit 1 Test Review
Review Questions
1. What is a business?
An organization that produces or sells goods or services that consumers need or wants for the
purposes of making a profit.
2. Define: Goods & Services and provide examples of each.
Goods: Are items of value that are produced & can be seen & touched (i.e. Car, Pen, and
Chips)
Services: Are items of value that cannot be touched (i.e. Haircut, doctors appointment, and
dentist appointment)
3. Define: Needs & Wants and provide examples for each.
Needs: Items necessary for survival (i.e. Food, Water, and Air)
Wants: Items not necessary for survival but used or bought for please and comfort. (i.e.
Phone, Take out, Movies)
4. List, describe, & provide an example of the 5 stages in Maslow’s Hierarchy of Needs.
Psychological needSafetyBelongingEgoSelf Actualization
Water, Air, and
food
Security
Love
Friendship
Status
Travel
5. 5 Step of the Decision Making Model
1. Determine what decision has to be made
2. Identify the alternatives
3. Evaluate the advantages and disadvantages of each alternative
4. Make a decision and take action
5. Evaluate the decision
6. Define: Obsolete. Provide an example of a good that has gone obsolete and what it has
been replaced with.
A product or service that consumer no longer want because it has become outdated or has
been replaced by a new or improved product.
7. List 4 reasons why businesses fail and why they succeed?
8. Define: Demand & Supply. How are each of them created?
Supply: Is the quantity of a good or service that businesses are willing & able to provide within a
range of prices that people would be willing to pay.
Demand: Is the quantity of a good or service that consumers are willing and able to buy at a
particular price.
9. What is the difference between a for-profit and a non-profit business? Provide an
example for each.
Non-Profit business raise money for a goal and not -for profit uses the extra profits that hey
earn for improving for their members.
10. What are the 5 forms of business ownership? For each forms of business ownership
know the features, advantages, and disadvantages.
11. Differentiate between the three types of corporations.
Corporation, Cooperative, Franchise
 A corporation is run by Individuals who buy shares become owners of the company
are called Shareholders
 A cooperative is owned by the workers or by members who buy the products or use
the services that the business offers
 In a franchise operation, the franchiser, licenses the rights to its name, operating
procedure, designs, and business expertise to another business, the franchisee.
12. Define: Franchiser and Franchisee.
Franchiser: The parent company who grants the franchise to the franchisee
Franchisee: A person who runs a franchise operation and is under contract, or licensing
agreement, with the franchiser
13. What are the four types of businesses?
14. What does SOHO stand for?
Small Office, Home Office
15. Define the two financing methods?


Debt Financing
 Borrowing money to run the business (Financial Institutions – BMO, etc.)
Equity Financing
 Using the savings or investors savings to run your business
 Often means that you are giving up part of the ownership of the business (investors)
16. What are the five International Business Structures?
Customers
Suppliers
Competitors
Universities
Divisions of Government
17. Explain how businesses are interdependent.
Businesses are interdependent
-They rely on other businesses to supply goods or services in their supply chain so they can deliver a
good/service to a customer.
Graphing Supply & Demand Practice
Problem 1:
Price
$80
$90
$100
$110
$120
$130
$140
$150
$160
Quantity Supplied
100
125
150
175
200
225
250
275
300
Quantity Demanded
300
275
250
225
200
175
150
125
100
Graph the Supply & Demand curve for Chairs and state what the Point of
Equilibrium is.
Success Criteria:
 Always label Supply Curve, Demand Curve, and Point of Equilibrium
 NO legend Required
 Always label both axis (price and quantity)
 Needs Title
 Remember to give the actual Point of Equilibrium (coordinates)