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Lecture 2

Lecture 2 - factors of production

Management (MGT)
Course Code
Chris Bovaird

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Purpose of businesses are to make sure the money coming is more than the money spent
Businesses that are extremely profitable, loads of people pay a lot of money for their products and
services; the business makes a lot of money (example: Microsoft)
American auto workers are very well paid
One of the problems were that the GM and Chrysler were paying their workers a lot
Revenues were not as high as they couldve have been and expenses were also high and they made a
big loss
Factors of production
Stu dy of management is the stu d y of h ow to manage individu al b u sines s es
What are the b asic ingredients for what makes u p a b u sines s?
Theory of factors of pro d u ction says that a b u sines s h as to h ave some b asic DNA/some raw ma
Four b asic fu n d amental b uildin g blocks of h ow an y b o dy b uilds a b u sines s fac tors of pro d u ctio n
Natural reso urc e s raw materials yo u fin d in n ature or g row from the gro u n d
McDon alds h ave to b uy h amb urger b u n s; made of whe a t
Su b way h as to g o g et me a t ; h am grown at a firm
Glob e and mail n e e ds p aper from the tre e s; Apple n e e ds co p p er an d tit anium; GM n e e ds to b u y
ru b b er
They all come o u t of the e arth
Every b u sines s req uires some small amo u n t of n atural reso urc e s or raw materials
Lab o ur n e e d at le a st o n e p erson workin g at the b u sines s
Busines s es will n e e d at le a st o n e p erso n; big b u sines s es n e e d th o u san d s, etc
Capit al mo n ey or the ma c hines or the te c hnologies that mo n ey c a n b uy
Most p eo ple when they start a b u sines s h ave to g o to a b an k or wit h d raw savin g s
Ne e d to b uy eq uipment, etc

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Take out money and bought what they need (pay rent, etc)
Cant run Globe and Mail without a printing press; McDs without an oven
Businesses need to raise money
Simple businesses need minimal amounts of technology
Entrepreneurs are the people who are motivated to start a business possible fourth factor of
Another possibility society that encourages entrepreneurship, and starting a business
You cant have businesses unless theres people who find a need or gap in t he marketplace
Want X, dont have X, people need X so they make X and sell X to make a profit
Greatest accomplish of the western world in the 20
th century was defeating fascism
People realized governmen ts may not be the best organization to manage t he economy
Not very good at running studios, businesses, selling of products, etc
Late 70s, politicians realized that the power of the state is somewhat limited
The companies were just not working
Raegan realized the governments were the problem
80s: a lot of businesses the govt took over because of depression and tried to run in the 50s an
were not doing a good job
Lower taxes, diminish the role of govt
Wanted to foster a spirit of entrepreneurship
The advantage of our system is that it allows smart people to start businesses
Our society says its okay to start a business fourth factor
Economic systems
A country = an economic system = a nation state
Each have a slightly different way in which they run the economy
Every country does things differently, run the resources, production, etc, who control what, who
job, who works where, machines and technology to buy, products we make, how to pay employ
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