Management Chapter 1
- An organization that produces or sells goods or services in an effort to make a profit.
- What remains after a businesss expenses have been subtracted from its revenues
- Money spent on producing its goods and services and generally running the business.
- Also known as costs
- Money earned from selling products and services.
- Also known as sales
Factors of Production: LENC
- Basic resources that a country`s businesses use to produce goods and services.
- 4 factors of production: labour, capital, entrepreneurs, natural resources
- Information resources are often included as a fifth factor as well [NOT ON TEST]
- Businesses need people
- Ex. Human beings, workers
- Raw materials found in ground, grown from earth, or harvested from nature.
- E.g. coal, wheat, water, wood
- Money, or machines and technologies that money can buy
- E.g. computers, phones, hammers, tractors
- The people who assemble and organize the other factors of production
- The individuals who make it all happen Economic System 2 Types
Command or Planned Economies GOVt
- Gov`t own control factors of production
- Gov`t makes all/most of decisions
Market Economies: PEOPLE
- Individuals own/control factors of production
Planned Economies 2 Type
Communist Economies 100%
- Govt owns/controls all factors of production
- Makes 100% of economic decisions
- E.g. very few, probably North Korea
Socialist Economies: >50%
- Govt owns/controls majority of factors of production, including principal industries
- Makes most of economic decisions
- >50% Govt
Market Economies 2 Types
Capitalist Economies: 0%
- Individuals owns/controls all factors of production
- Individuals makes 100% of economic decisions
- E.g. NONE
- 0% Govt
Mixed Market Economies <50%
- Individuals own/controls majority of factors
- Individuals make MOST of economic decisions
- Govt regulate and tax, run some business
- E.g. Canada, USA, UK, France, China
- <50% Govt Privatization
- Process of converting government enterprises into privately owned companies
- Reduction in the number of laws affecting business activity and in the powers of
government enforcement agencies
- Frees companies to do what they want without government intervention
How Government Influences Business:
Government as Customer:
- Govt buys thousands of different products and services from business firms, like
office supplies, office buildings, computers etc.
- Govt is also the largest purchaser of advertising in Canada.
- Govt expenditures on goods and services amount to billions each year
Government as Competitor:
- Govt also competes with business through Crown corporations, which are accountable
to a minister of parliament for their conduct
- Crown corporations exist at both provincial and federal level, and account for a
significant and wide variety of economic activity in Canada.
Government as Regulator:
- Federal and provincial govts in Canada regulate many aspects of business activity
- Regulates business thru many administrative boards, tribunals, or commissions
- Federal level, e.g. include Canadian and Radio-television and Telecommunication
Commission [CRTC], which issues and renews broadcast licenses
o Canadian Transport Commission [CTC] which makes decisions about route and
rate applications for commercial and railway companies
o Canadian Wheat Board regulates prices of wheat
- Important reasons for regulating business activity include protection competition,
protecting consumers, achieving social goals, and protecting the environment. Government as Taxation Agent:
- Taxes imposed and collected by federal, provincial, and local governments
- Revenue taxes: taxes whose main purpose is to fund government services and programs
[e.g. income taxes]
- Progressive revenue taxes: taxes levied at a higher rate on higher-income taxpayers and
at a lower rate on lower-income taxpayers.
- Regressive revenue taxes: taxes that cause poorer people to pay a higher percentage of
income than richer people pay.
o Levied at the same rate regardless of persons income
o E.g. sales tax
- Restrictive taxes: taxes levied to control certain activities that legislators believe should
o E.g. taxes on alcohol, tobacco, and gasoline
Government as Provider of Incentives
- Federal, provincial, and municipal govts offer incentive programs that help stimulate
- Also offer incentives thru the many services they provide to business firms thru
o e.g. Export Development Corporation: assists Canadian exporters by offering
export insurance against nonpayment by foreign buyers and long-term loans to
foreign buyers of Canadian products), Energy, Mines and Resource Canada, and
- Other incentive programs, like municipal tax rebates for companies that locate in
certain areas, deign assistance programs, remission of tariffs on certain advanced
technology production equipment.
- Govt incentive programs may or may not have the desired effect of stimulation
o May also cause difficulties with our trading partners.
Government as Provider of Essential Services
- Federal, provincial, and municipal govt facilitate business activity thru wide variety of
services they supply
- Provides highways, postal service, minting of money, armed forces, and statistical
data on which to base business decisions
- Maintains stability thru fiscal and monetary policy
- Provides streets, sewage, sanitation systems, police and fire department, hospitals,
- These activities create the kind of stability that encourages business activity.