Chapter 1: Understanding the Canadian Business System
The Concept of Business and Profit
=> Business: An organization that produces or sells goods or services in an effort to make a
=> Revenues: The money a business earns selling its products and services.
=> Expenses: The money a business spends producing its goods and services, and generally
running the business.
=> Profit: The money that remains (if any) after a business’s expenses are subtracted from its
Economic Systems around the World
=> Economic System: The way in which a nation allocates its resources among its citizens.
=> Factors of production: The resources used to produce goods and services: labour,
capital, entrepreneurs and natural resources.
=> Labour: Also referred to as human resources, labour is the mental and physical
capabilities of people. An example can be seen in a major corporation. All members of the
corporation who contribute to running and maintaining the business, its liabilities and assets
are forms of labour.
=> Capital: The funds used to operate an enterprise. A major source of capital for small
businesses is personal investments, which can come from individual entrepreneurs, from
partners who start businesses together or from investors who buy stock. Another form of
capital can be the revenue that enters the business once it successful enters the economic
=> Natural resources: Items used in the production of goods and services in their natural
state, including land, water, mineral deposits and trees. Once just limited to resources that
could only be produced in nature, it now relates to include all physical resources.
=> Entrepreneurs: The people who accept the opportunities and risks involved in creating
and operating businesses. An example can be seen in the establishment of Facebook, by Mark
Zuckerburg, who had the technical skills to understand the benefits of connecting to the
Internet, and realized the potential behind network connections between its users. The
entrepreneur is able to identify unmet consumer needs, such as advertising and selling a good
or service. The entrepreneur is able to spot a promising opportunity and develop a good plan
for capitalizing on it.
=> Information resources: information such as market forecasts, economic data, and
specialized knowledge of employees that is used to a business and that helps it achieve its
=> Command economy: an economic system in which government controls all or most
factors of production and makes all or most production decisions.
=> Market economy: An economic system in which individuals control all or most factors of
production and make all or most production decisions.
=> Mixed market economy: An economic system with elements of both market and
=> Privatization: the process of converting government enterprises into privately owned
=> Deregulation: reduction in the number of laws affecting business activity.