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CA (542,712)
UTSC (32,886)
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MGTA01H3 (350)
Lecture

Lecture Note for MGTA03, Lecture 2

4 Pages
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Department
Management (MGT)
Course Code
MGTA01H3
Professor
Ingrid L.Stefanovic

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Lecture Notes: Chapter 2
¾ Purpose of Economic System
o Create an environment where entrepreneurs can get hold of labour, capital and
resources. Therefore, they can make things that people want.
o Profits are created for owners and operators for the businesses
o How do we do know that an Economic System is doing the job that it should...?
¾ Is the Economy producing things people want?
o GDP(Gross Domestic Product)
Gross = large, aggregate
'RPHVWLFKHUHLQVLGH&DQDGD¶VERUGHUV
Product = things that people make
x Fantasy way of saying the total/value of all the things produced in
Canada in one year
x Canada is in the top dozen in Largest Economic System, we are a
player.
o GDP Growth
Is the economic system growing?
GDP growing = more people making more stuff
GDP falling = fewer people buying less stuff
The Chinese and Indians were doing things really, really well a few years
ago since their GDP increase was 10% and 7% respectively
The importance of GDP growth is for economic system growth.
o Productivity
The amount of man-hours and man-days it takes to produce stuff.
Ratio of inputs to outputs
How much of the input is required to produce some output
Why are the Americans more productive than the Canadians?
x More advanced technology
x American businesses spend a lot more in capital; they invest more
in fancy machines than we do.
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Description
Lecture Notes: Chapter 2 ¾ Purpose of Economic System o Create an environment where entrepreneurs can get hold of labour, capital and resources. Therefore, they can make things that people want. o Profits are created for owners and operators for the businesses o How do we do know that an Economic System is doing the job that it should...? ¾ Is the Economy producing things people want? o GDP(Gross Domestic Product)  Gross = large, aggregate  'RPHVWLF KHUHLQVLGH&DQDGD¶VERUGHUV  Product = things that people make x Fantasy way of saying the total/value of all the things produced in Canada in one year x Canada is in the top dozen in Largest Economic System, we are a player. o GDP Growth  Is the economic system growing?  GDP growing = more people making more stuff  GDP falling = fewer people buying less stuff  The Chinese and Indians were doing things really, really well a few years ago since their GDP increase was 10% and 7% respectively  The importance of GDP growth is for economic system growth. o Productivity  The amount of man-hours and man-days it takes to produce stuff.  Ratio of inputs to outputs  How much of the input is required to produce some output  Why are the Americans more productive than the Canadians? x More advanced technology x American businesses spend a lot more in capital; they invest more in fancy machines than we do. www.notesolution.com x Higher competition/More competitionÆ because there is more people, there are more businesses x Lower Taxes in the U.S x International Relations x ClimateÆ86$FDQJURZVWXIIPRQWKVD\HDU&DQDGDFDQ¶WGR that because of the winter x We are more inheritably conservative; entrepreneurs in other countries are less attracted to investing in Canada. x Quality of WorkersÆ the brightest and the best, the most productive people are heading to USA. It was a huge concern 15 years ago. But LW¶V slowing down a little bit.  Canada is in the top 20 in the richest/poorest countries on Earth(not recent survey) o Inflation  Is bad.  Prices that go up. For example shoes cost 10 dollars one year, the next year it costs 12 dollars. The exact same pair of shoes, the same product.  When the price goes up, people buy less.  People with fixed incomes are hurt by inflation since it forbids them to buy produces x Retired people have fixed income, no raise, and same amount of money for rest of UHWLUHPHQW&DQ¶WEX\DVPXFKVWXII  You are paying more for the same product.  Measure of inflation : use CPI( Consumer Price Index) x Statistics Canada assumes what Canadians own/buy o We have a 4 bedroom house, we go to grocery store once a week, we buy certain stuff, we buy 40 L of gas a week, we rent a movie once a week, we pay 40 dollars for phone servicesÆ basket of goods(what consumers typically buy)Æ figure out costs what the price of all the costs within the basket of goods is www.notesolution.com o CPI Æ increased by 2.3%.  Ex. What costs you 100 dollars one year; it will go up to 102.3 dollars the next year. o Government of Canada watches the inflation, they measure LWEXWWKH\GRQ¶WVWRSLWWKH\MXVWSXWLQSROLFLHVWRNHHSLWin control o Since prices only went up by 2.3%, &DQDGDGLGQ¶WSXWLQany policies since they are content that we can live with this slight inflation. o Canadian government said that anything less than 3% we can live with x A couple years agoÆ Canada is in top 5 for Consumer Price Inflation o The inflation rate in Zimbabwe is over a million % per year  Money is worthless, a loaf of bread will cost you hundreds of thousands of dollars o In Japan, there is deflationÆ the prices are going down from one year to the next  People stop making purchases when the things they want to buy go down in priceÆ LW¶V a butterfly effect and it ruins the economic system because people become unemployed. x EXAMPLE: people stop buying houses, than real estate agents become unemployed, plumbers lose jobs, than they stop going to restaurants and buying stuff and then restaurants and etc lose money... etc. Etc o Unemployment  Labour is underutilized  When you have bright and intelligent people and you cannot find them work, then your economy is not working. www.notesolution.com  People who want to work, who could work, who have bills to pay and families to feed, are not working and sitting on the sidelines: waste of resources  Unemployment rate is higher because of our climate and our geographyÆ WKDW¶VZK\RXU*'3SHUFDSLWDLVORZHU  Canada is top 5 in year 2006 in top unemployment rates  USA has lower unemployment rate than Canada  Something wrong in Europe, because a lot of the European countries have the highest unemployment rates. Ex Belgium, France, Germany www.notesolution.comLecture Notes: Chapter 2 Purpose of Economic System o Create an environment where entrepreneurs can get hold of labour, capital and resources. Therefore, they can make things that people want. o Profits are created for owners and operators for the businesses o How do we do know that an Economic System is doing the job that it should...? Is the Economy producing things people want? o GDP(Gross Domestic Product) Gross = large, aggregate 42089L.K070L38L0,3,,8-47078 Product = things that people make N Fantasy way of saying the totalvalue of all the things produced in Canada in one year N Canada is in the top dozen in Largest Economic System, we are a player. o GDP Growth Is the economic system growing? GDP growing = more people making more stuff GDP falling = fewer people buying less stuff The Chinese and Indians were doing things really, really well a few years ago since their GDP increase was 10% and 7% respectively The importance of GDP growth is for economic system growth. o Productivity The amount of man-hours and man-days it takes to produce stuff. Ratio of inputs to outputs How much of the input is required to produce some output Why are the Americans more productive than the Canadians? N More advanced technology N American businesses spend a lot more in capital; they invest more in fancy machines than we do. www.notesolution.com
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