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MGMT 1000 Midterm: Management Midterm Notes

Course Code
MGMT 1000
Kathleen Rodenburg
Study Guide

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Management Chapter 1
Business- an organization that produces or sells goods or services in order to make a profit
Profit- what remains after a business’ expenses have been subtracted from its revenues
Not for profit organization- an organization that provides good and services to customers, but does not
seek to make a profit
Economic System- the way in which a nation allocates its resources among its citizens
Factors of Production (LCENI)
Labour- the people who work for a company
Capital- the funds that are needed to start a business and to keep it operating and growing
Entrepreneurs- people who accept the opportunities and risks involved in creating and
operating businesses
Natural Resources-include all physical resources such as land, water and trees
Information- specialized knowledge of people who work in businesses
Command Economy- an economic system in which government controls all or most factors of
Communism- Economic system in which all (or nearly all) property and resources are collectively
owned by a classless society and not by individual citizens
Socialism- government controls only selected major industries
Market Economy- an economic system in which individuals control or all most factors of
Input Market- firms buy resources that they need in the production of goods and services
Output Market- firms buy resources and services in response to demand on the part of customers
Capitalism allows private ownership of the factors of production and encourages entrepreneurship by
offering profit as an incentive
Fiscal Policy-
Monetary Policy-
Mixed Market Economies
- Economic systems with elements of both and command and market economy
- Privatization- transfer of activities from government to private sector
- Deregulation- a reduction in the number of laws affecting business activity
How Government Influences Business
Government as a customer
Government as a competitor

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Government as a regulator
o Promoting competition
o Protecting Consumers
o Achieving Social Goals
Government as a taxation agent
Government as a provider of incentives and financial assistance
Government as a provider of essential services
How Business Influences Government
Lobbyist, trade associations and advertising
Lobbyist- someone hired by a company to represent its interests with government officials
Trade Organization- an organization dedicated to promoting the interests and assisting the members of
a particular industry
Demand and Supply in a Market Economy
in a market economy, decisions about what to buy and sell are determined primarily by the forces of
supply and demand
Demand- the willingness and ability of buyers to purchase a product or service
Supply- the willingness and ability of producers to offer a good or service for sale
Law of Demand- states buyers will purchase (demand) more of a product as its price drops
Law of Supply- states producers will offer (supply) more for sale as the price rises
Demand and Supply Schedule- assessment of the relationship between different levels of demand and
supply at different price levels [help managers understand the relationships among different levels of
demand and supply at different price levels
Demand and Supply Curves
Demand Curve- shows how many prods will be demanded [bought] at different prices
Supply Curve- shows how many units of a product will be supplied [offered for sale] at different prices
Equilibrium Price- Profit maximizing price at which the quantity of goods demanded and the quantity of
goods supplied are equal
Private Enterprise and Competition
Private Enterprise- system which allows individuals to pursue their interests with minimal government
restriction, Consists of 4 elements
1. Private Property
2. Freedom of Choice
3. Profits

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4. Competition
Degrees of Competition
Perfect Competition- a market/industry characterized by a very large # of small firms producing
an identical product so that none of the firms have an ability to influence price (determined by
supply and demand) Ex. Canadian agriculture
Monopolistic Competition- A market/industry characterized by a large # of firms supplying
products that are similar but distinctive enough from one another to give firms some ability to
influence price [fewer sellers but many buyers] Ex. Polo Ralph Lauren vs. Sears [ product
differentiation is key]
Oligopoly- A market/industry characterized by a small number of very large firms that have the
power to influence the price of their product and resources [ rather than compete on price,
focus is on advertising] Ex. Cereal producers
Monopoly- A market/industry with only one producer, who can set the price of products and
Competition Chart
# of Businesses
Very many
Type of Product
Standard or
Not applicable
Entry and Exit of
New Business
Very easy
Fairly easy
Very difficult
Market Power
Hair dressing
Public utilities
Identifying Competitors- In practice any one who produces a substitute product is a
1. They have similar performance characteristics
- Benefits consumers look for to meet their needs
- Features: a physical or tangible component of your product/service
- Benefits: the non-physical, emotional and intangible reactions to your product/service
2. Similar occasion for use
- Transportation Occasion: Bike, Cab, Bus
- Beverage Occasion: beer, coffee, dick
3. Sold in same geographic area
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