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MGTA01H3 (350)
Lecture

Chapter 1B Lecture

1 Page
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Department
Management (MGT)
Course Code
MGTA01H3
Professor
Ingrid L.Stefanovic

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Business and Exchanges ± the Economic System
o Economic systems
o Businesses generate profits through exchanges
o A group of businesses, and other non-business organizations, the members
of which engage in exchanges in a regular and organized way, forms an
economic system
o How are the factors of production and the exchanges between businesses
organized in different economic systems?
o Who owns and manages the factors of production?
o On what basis are decisions made?
o How is the economic system regulated?
Command Systems
Market ± based Systems
Mixed Systems
o These distinctions are one way of understanding how economic systems are
organized and regulated
o Command Systems
o Centralized, usually government, ownership of the means of production
o Centralized, bureaucratic planning of business decisions
o Decisions based on goals other than market considerations
o Ideal type of the command system was communist governments, with
strong centralized planning
o Large business corporation is also a form of command or hierarchy system,
even though externally the corporation runs in a market economy
Hutterites
x All means of production owned by the colony
x No private ownership of any goods
x Planning of all activity by leadership groups
x Goals of the community are not economic or market-driven
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Description
Business and Exchanges the Economic System o Economic systems o Businesses generate profits through exchanges o A group of businesses, and other non-business organizations, the members of which engage in exchanges in a regular and organized way, forms an economic system o How are the factors of production and the exchanges between businesses organized in different economic systems? o Who owns and manages the factors of production? o On what basis are decisions made? o How is the economic system regulated? Command Systems Market based Systems Mixed Systems o These distinctions are one way of understanding how economic systems are organized and regulated o Command Systems o Centralized, usually government,
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