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MGTA01-Lecture 2-16 Sept..docx

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University of Toronto Scarborough
Management (MGT)
Chris Bovaird

16 September- Lecture 2 Last week’s main points: Definition of “business” The “profit” motive Revenues or sales Costs or expenses Profit and Loss This Week’s Main Points Factors of Production Economic Systems Command Economies Market Economies Supply and Demand Degrees of Competition Factors of Production There are basic building blocks used to produce anything. We call those basic building blocks: “Factors of production” natural resources: raw materials found in the ground, grown from the earth, or harvested from nature. Examples: coal, wheat, water, wood > the world’s most profitable companies pump oil from the ground Labour: Businesses need people. Labour intensive business: Those businesses that need a LOT of people as workers Ex. Walmart: employs hundreds of thousands of people Capital: money, or the machines and technologies that money can buy. e.g. computers, hammers, tractors, phones, software Entrepreneurs: People who assemble and organize the other factors of production. Fifth factor of production (in the textbook): collection of information/data (The prof disagrees, because data is just a bunch of numbers. Information in and of itself is completely useless- you need smart labour and smart people to analyze that information)  Google is such a successful company because it takes information and its clever information, organize it, analyze it, and re-package it and sell it to people  FB has lots of irrelevant information  Raw data is irrelevant  Packaged and analyzed data is useful Is having any one factor of production more important than the other? Economic Systems The way different countries answer basic economic questions:  who should own the factors of product’n?  who controls the factors of productn?  Who decides what should be produced? Different countries answer these questions differently: government or individuals in control in control (they sent all these soldiers to work) Governments: Individuals: own most factors own most factors control most factors control most factors make most decisions make most decisions Command Market Economies Economies Command Economies - 2 Types [Also called Planned economies] Business men are short-sighted Only interested in their own profits Businesses can’t see the long view and bigger picture of society’s needs and wants, therefore, in these economies, the brightest people go to the best universities and get the best degrees. If you give the smartest and best people jobs with the centre, they can sit there Communist Economies: Government owns/controls all the factors of production makes 100% of economic decisions. Examples: very few, probably North Korea Socialist Economies: Government owns/controls majority of the factors of production, including principal industries, makes most of economic decisions. Example: Cuba -> taxi cabs are privately owned, but just about everything else is controlled by the government  over the last 4 years, under Castro, the government is moving back from controlling businesses and more and more types of private industries are allowed, so it’s moving away from communism, through socialism, to somewhere in the middle (where the vast majority of the big important countries of the planet are)  The govnerm
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