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Lecture 2

MGTA01H3 Lecture Notes - Lecture 2: Taxation In Canada, Monopolistic Competition, Risk Aversion

Management (MGT)
Course Code
Chris Bovaird

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Introduction to Management Midterm Review
Chapter One
economic and political theories that argue owner of the means of
production are a class of people who grow wealthy by exploiting
the labour of others
People should be left to pursue their own self-interest, without
government interference. Liberalism assumes that people will
make the choice to cooperate with other because it is in their best
interest to do so
Chapter Two
-Factors of production:
Basic building blocks that when combined together make
businesses and produce things
Four factors of production:
1) Labour
2) Capital
3) Entrepreneurship
4) Natural resources
-Factor Substitution:
Substituting one factor for another so products can be produced
more quickly/cheaply
eg. Capital labour (industrial revolution)

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Chapter Three
Study of how people produce the things they want and need
-Economic system:
Means by which a society produces the goods and services that the
people need
-Through a country’s economic system the government decides:
1) Who owns factors of production
2) Who controls factors of production
3) Who decides what needs to be produced
4) Who decides how goods and services are distributed
Planned Economies vs. Market Economies
-Planned economies:
Countries in which most of the factors of production are controlled
by the state
-Market economies:
Countries in which more of the factors of production are controlled
by individuals. Entrepreneurship and business ownership
-Planned economic system advocates argue:
1) Only state (with the ability to create/enforce laws) has the power
and authority necessary to feed/clothe/educate population
2) Businesses are primarily concerned with making profit.
Businesses have no concern for those who are not customers (do

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not have the money to buy products.) Only state has interest in
welfare of all members of society.
-Market economic system advocates argue:
1) While state controls sounds good in theory, works poorly in
practice. Full range of people’s needs too vast for ones entirely
(including government) to plan, produce and distribute
2) Government bureaucrats work away from the people and lack
the info of people’s changing needs. Government officials lack
skills to effectively run businesses.
3) Private enterprise=competition
State run enterprises lack motivating discipline of having to
compete for your patronage. State-run enterprises can become
unresponsive, wasteful and inefficient.
4) Planned economic systems concentrate power to small number
of political elite. power corrupts
2 varieties of planned economies
1) Communist economies:
Economic system where all factors of production are controlled by
the state. No private property.
2) Socialist economies:
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