MGTA03-ch1.docx

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Department
Management (MGT)
Course
MGTA01H3
Professor
,
Semester
Winter

Description
• Factors of production- labour, natural resources, capital ( the money), the entrepreneur and information • Profits and loss- revenues- cost= result that is positive is profit, if result is negative then it’s a loss— Economic systems Command or planned economy—government owns/controls all factors of production—so the machinery, the land, the technology. Governments make all/ most of the decisions. Usually in communist environment—eg. Soviet union, north korea, • so much less personal ownership of the factors of production socialist economies • government owns/controls majority of the factors of production, including principal industries, makes most of the economic decisions • eg. Cuba Chapter 1- the concept of business and profit • business- an organization that seeks to earn profits by providing goods and services • profit- the money that remains after a business’s expenses are subtracted from its revenues • expenses- the money the business spends producing its goods and services and generally running the business. AKA costs • revenues—money a business earns selling its products and services. Aka sales • profits reward the owners for taking the risks with their time and money • in canada’s economic system, businesses exist to earn profits for owners, but consumers also have freedom of choice • a business won’t survive if there isn’t any demand for its goods or services • someone who can spot a promising opportunity and then develop a good plan for capitalizing on it can succeed • a healthy business climate also contributes to our quality of life and standard of living • business profits enhance the personal income of millions of owners and stockholders and business taxes help to support governments at all levels Economic systems around the world • Economic system-- the way in which a nation allocates it’s resources among its citizens, economic systems differ in terms of who owns and controls these resources, known as the ―factors of production‖ • Factors of production—the resources used to produce goods and services: labor, capital, entrepreneurs and natural resources, and recently information resources are being added • Labor—the mental and physical training and talents of people: sometimes called human resources. Employees who are well trained and knowledgeable can be a real competitive advantage for a company • Capital—the funds needed to operate an enterprise. You need capital to start a new business and keep it running and growing • Investments can come from individual entrepreneurs, partners or investors who buy stock • Entrepreneurs—an individual who organizes and manages labour, capital and natural resources to produce good and services to earn a profit, but who also run the risk of failure • Natural resources—items used in the production of goods and services in their natural state, including land, water, mineral deposits and trees • Information resources—information such as market forecasts, economic data, and specialized knowledge of employees that is useful to a business and that helps it achieve its goals • Businesses rely heavily on market forecasts, the specialized expertise and knowledge of people and various forms of economic data for much of their work • Much of what they do results in either the creation of new information or repackaging of existing information Types of economic systems • Economic systems differ in ownership—whether its private or the government owns it, and the way that decisions are made about production and allocation • Command economy—an economic system in which government controls all or most factors of production and makes all or most production decisions • Market economy—economic system in which individuals control all or most factors of production and make all or most production decisions Command economies • Two basic forms of command economies are communism and socialism • Communism—type of command economy in which the government owns and operates all industries, eg. North Korea • Marx envisioned a society in which individuals would ultimately contribute according to their abilities and receive economic benefits according to their needs, and he also expected government ownership factors to be only temporary • Socialism—a kind of command economy in which the government owns and operates the main industries, while individuals own and operate less crucial industries, eg. CUBA • Workers in socialist countries are usually allowed to choose their occupations, most work for the government • Government operated enterprises are inefficient, because positions are filled based on political consideration rather than ability • Extensive welfare systems have resulted in high taxes, socialisms is generally declining in popularity Market economies • Market—mechanism for exchange between the buyers and sellers of a particular good or service • Both buyers and sellers enjoy freedom of choice • Capitalism—a kind of market economy offering private ownership of the factors of production and of profits from business activity • Economic basis of market processes is the operation of demand and supply Mixed Market economies • Mixed market economies—economic system with elements of both a command economy and a market economy; in practice, typical of most nations economies • Privatization—the transfer of activities from the government to the public sector—prevalent in many countries now • eg. Canada has privatized its air traffic control system—in each case the new enterprise reduced its payroll, boosted efficiency and productivity and quickly became profitable • deregulation—a reduction in the number of laws affecting business activity—frees companies to do what they want without government intervention Interactions between business and government Government as customer • government buys thousands of different products and services from business birms • government is also the largerst purchaster of advertising in Canada • many businesses rely on government purchasing for survival and prosperity • government expenditures on goods and services amount to billions of dollars each year Government as regulator • federal and provincial governments in Canada regulate many aspects of business activity—with administrative boards, tribunals or commissions • reasons for regulating business—protecting competition, protecting consumers, achieving social goals and protecting the environment Government as taxation agent • taxes are imposed and collected by federal, provincial and local governments • revenue taxes—taxes whose main purpose is to fund government services and programs • progressive revenues—taxes levied at higher rate on higher income tax payers and at lower rate on lower income taxpayers • regressive revenues taxes-- taxes that cause poorer people to pay high percent of income than riche
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