MGTA01H3 Chapter Notes - Chapter 1: Profit Motive
●A business is an organised effort to provide the things that people need and want, and are
willing to pay for. The organisation seeks a profit
●Exists to satisfy customer needs while making a profit
●Five characteristics common to all businesses
○They are organised efforts
■One or more people must have an idea
■They must have put time, thought, and effort prior to executing
○They provide things that people need and want
■The business idea must be a response to a need that has been identified
■Business must satisfy the needs of the consumer
○Must try to satisfy customers needs
■A business would not exist unless they produce something that customers
or clients are willing to pay for
○They generate revenue from sales
■The money that business receives from customers is known as revenue
■Revenue is the money that the business receives every time a product or
service or sold to a customer
■The customer must decide whether or not the product or service the
business offers is worth paying their money for
■The business must pay the costs of production of a product or service and
sell it in order to gain revenue
○They try to make a profit
■Profit is the positive benefit from running a business
■Profit is the essential motivation for starting a business
■The desire to make money is referred to as “the profit motive”
■When the revenue generated is not enough to cover the costs or expenses
of production, a loss is present
●Goods
○Products which are tangible, they can be held and touched
●Services
○Products which are intangible, they cannot be seen or touched, but experienced on
receival
●The profit motive
○Business supply goods and services with the dual intention of satisfying customer
needs while trying to make a profit
○Organisations also try and supply goods and services, without trying to make a
profit
○Karl Marx
■Famous writer who thought that the profit motive was a bad thing
■Marxism
●The economic and political theories developed by Karl Marx.
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MGTA01H3 Full Course Notes
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Document Summary
A business is an organised effort to provide the things that people need and want, and are willing to pay for. Exists to satisfy customer needs while making a profit. One or more people must have an idea. They must have put time, thought, and effort prior to executing. They provide things that people need and want. The business idea must be a response to a need that has been identified. Business must satisfy the needs of the consumer. A business would not exist unless they produce something that customers or clients are willing to pay for. The money that business receives from customers is known as revenue. Revenue is the money that the business receives every time a product or service or sold to a customer. The customer must decide whether or not the product or service the business offers is worth paying their money for.
