Study Guides (400,000)
CA (160,000)
UTSC (10,000)
MGT (200)
MGTA01H3 (100)

Management-Textbook Notes.pdf

Management (MGT)
Course Code
Chris Bovaird

This preview shows pages 1-3. to view the full 29 pages of the document.
Business: organization that produces or sells goods in order to make a profit
Profit: the amount that remains after expenses are subtracted from revenue
Revenue: the total amount made by the organization (aka. Sales)
Anyone can setup a business to earn profits
Consumers also have freedom of choice to buy what they want
Businesses must take in account consumer demands
Canadian economic system:
Economic systems differ in the way countries manage factors of production
Economic Systems around the World: the way in which a nation gives out resources amongst the population
Labour, natural resources, capital, entrepreneurs
Factors of Production: resources used to produce goods and services
Advantageous if people are more knowledgeable
Labour (human resources): mental and physical capability of people
Can be own investment, partners or investors who invest in stocks
Revenue keeps the business going (ongoing source of capital)
Capital: funding needed to operate business
Manages and organizes labour, capital and natural resources in order to produce goods and services for profit
May run the risk of failure
Entrepreneurs: people who take a risk in operating a business or starting a new one
Natural Resources: items used in their natural state for goods and services
Information Resources: highly reliant because market forecasts, specialized expertise, knowledge of people and other economicdata used to predict future of
Ownership is private
Factors owned by government
Types of Economic Systems: different ones manage factors of production in different ways
Envisioned society where government was a guide
Society would later be allowed to take ownership of own services
Did not work out as planned
Communism: government owns and operates all factors of production (Karl Marx Theory)
Large population works for government
Inefficient because management positions are based on political consideration rather than ability
Causes high taxation and extensive public welfare
Socialism declining in popularity
Socialism: government owns and operates only major businesses
Command Economies: rely on centralized government to control factors of production and to make most allocation decisions
Capitalism: promotes private ownership of factors of production and of profit from the business
Economic basis of market economy is process of demand and supply
Market Economies: buyer free to sell what they want, consumer free to buy what they want (Canadian economy)
Privatization: from government to private owned
Pros: reduced payroll, greater efficiency and productivity, more profitable
Eg) Canadian air traffic control system is now privatized
Deregulation: reduction of laws on the organization
Mixed Market Economies: mix of both types of economies (Canadian economy)
Government buys lots of goods and services
Eg) office buildings, computers, office supplies, helicopters etc.
Government as Customer
Competes with businesses through Crown corporations (accountable to minister of parliament)
Crown Corporations: government owned business (hydro one)
Government as Competitor
Regulates businesses through administrative, tribunal or commission
Eg) Canadian Wheat Board controls price of wheat
Reasons for regulating: protect competition, protect consumers, achieve social goal and protect environment
Government as Regulator
Revenue Tax: to fund services and programs
Progressive Revenue Tax: more tax for higher income, low tax for lower income
Poorer people end up paying higher % of their income
Regressive Revenue Tax (sales tax): same for all income levels
Imposed to control questionable products and provide revenue to the organization
Restrictive Tax: tax on alcohol, tobacco etc
Government as Taxation Agent
Eg) toyota and hyundai receive much money in the form of training workers, interest free loans, and suspension of custom duties
Government as Provider of Incentives
Provides highways, postal services, minting of money, armed forces etc.
Creates stability that encourages business activity
Government as Provider of Essential Services
How Government Influences Business (Canadian Economy)
Buyers will purchase more of the product as price drops and less of the product as price increases
Law of Demand: willingness to buy
Producers will offer more product as price rises and less of the product as price decreases
Law of Supply: willingness to offer goods and services
Assessment of relationship between demand and supply of good and it's price at different levels
Demand and Supply Schedule
Demand and Supply in a Market Economy
Chapter 1 Introducing the Contemporary Business World
Sunday, September 1, 2013
10:32 AM
Textbook Notes Page 1

Only pages 1-3 are available for preview. Some parts have been intentionally blurred.

Buyers will purchase more of the product as price drops and less of the product as price increases
Producers will offer more product as price rises and less of the product as price decreases
Law of Supply: willingness to offer goods and services
Assessment of relationship between demand and supply of good and it's price at different levels
Demand and Supply Schedule
Curve can be formed from the data in the schedule
Plot demand and supply on same graph
POI is the market price or equilibrium (profit maximizing price at which goods demand and supply is equal)
Demand and Supply Curves
Surplus: supply exceeds demand
Even though price may go up in this situation, profit will still be lower than if equilibrium was met
Shortage: demand exceeds supply
Surplus and Shortage
Private enterprise system: allows individuals to pursue own interest with minimal government restriction
Private Property Rights: ownership of resources in hands of individual
Freedom of Choice: choose what to buy, who to hire and what to produce
Profits: influence entrepreneurs on what goods they should produce, more profit when you work on your own
Competition forces businesses to be better or cheaper
Company with inferior, expensive products will fail
Competition: motivates businesses, to gain advantage, business must produce goods efficiently and be able to sell at reasonable profit
4 things required in private enterprise system
Products of all firms must be very similar so that buyer views them as the same thing
Both buyer and seller knows the price that others are paying and receiving in the marketplace
Since firms are small, easy to enter or leave market
Going price set by supply and demand and accepted by both buyer and seller
Eg) Canadian agricultural industry
Perfect competition: 2 important things must exist--> small firms and lots of them
Fewer sellers than perfect competition but same number of buyers
Sellers try to make their product unique from others by creating brand names, design or style, advertising
May be large or small businesses and can leave market easily if they have to
Eg) tide, coke, pepsi etc
Monopolistic competition:
Small number of sellers but they are quite large
Difficult for new sellers to come into market because of the large capital investment needed
Very influential in the sense that if one seller decides on an action the other firms will likely do the same
Eg) boeing and airbus are the only two airplane manufacturers
Only one producer
Complete control over price of the product
Only constraint-->how much consumer demand will fall as price rises
Eg) cable tv is currently a local monopoly. It will lose business if telephone and satellite companies start providing tv channels
Eg) electric company in a province responsible for all the power needed
Natural Monopoly: found in industries where one company can most efficiently provide the good
Degrees of Competition
Private Enterprise and Competition in a Market Economy
Textbook Notes Page 2

Only pages 1-3 are available for preview. Some parts have been intentionally blurred.

Is one factor of production more important than the others? If so, which one? Why?
The four factors of production are natural resources, labor, capital, and entrepreneurship. I think
the most important factor of production is labor. Despite having natural resources, the money
needed to start a business and the skills to visualize growth, without the people needed to
implement this thought and lead out the processes of making profit, a business could not be
formed. People are needed at managerial levels, technician levels and worker levels. Without the
knowledge and skills of people natural resources such as gasoline would not be delivered to
stores, it would not be priced upon appropriately, and new incentives and ideas would not be
brought to the market.
On various occasions, government provides financial incentives to business firms. For example,
the Canadian government provided expert assistance to Bombardier Inc. with its Technology
Transfer Program. Is this consistent with a basically free market system? Explain how this might
distort the system.
In a market economy, all businesses are free to choose what to sell and consumers are free to
choose what to buy. All businesses are privately owned and there is no influence from the
government. Government intervention as a provider of incentives distorts this system and makes
it into more of a mixed economic system. In a mixed economy, there is a combination of
command and market economy where businesses are privately owned but there is still some
government intervention. One of the ways governments do this is by being an incentive provider.
Therefore, the above example is more of a mixed market economy rather than market economy.
In recent years, many countries have moved from planned economies to market economies.
Why do you think this has occurred? Can you envision a situation that would cause a resurgence
of planned economies?
Planned economies also known as command economies have all businesses controlled by the
government. Market economies have people owning their own businesses with no intervention
from the government. This is effective in today's world because, it allows for more profit since
private owners can control their own businesses better. It allows more efficiency and productivity.
It also allows for freedom of choice from buyer and seller perspective. In a planned economy,
since the government owns everything, the distribution of labor is not to its best abilities since
positions are based on political standings rather than knowledge. Also, most people work under
the government's control so there is little freedom of choice. Resurgence of such as economy
would be needed in situations such as post war. This is because, after war, the country is very
distorted and the economy is probably weak. In this case, government intervention to sort out the
problems and plan everything would be necessary. Similar to the theory of Karl Marx where
planning is necessary and then the society can be independent where government support is not
Find an example where a surplus of a product led to decreased prices. Then find an example
where a shortage led to increased prices. What eventually happened in each case? Why? Is what
happened consistent with what economies predicts? Why?
Surplus is defined as more supply compared to what is demanded by the consumers. Shortage is
when there is less supply compared to demand. A recent example of surplus is teachers in
Ontario. There have been so many graduates from teachers college more than the demand, that
they do not have enough jobs which has caused the unemployment rate of Ontario to increase.
This unemployment has also had a major effect on the governmental debt. Recent graduates are
not able to repay their loans which therefore causes interest on loans as well as increased debt for
students, hence increased debt for government. This also causes, decline in market since people
will be less willing to buy goods and services since they cannot afford it therefore prices will drop
Questions for Analysis 1
Monday, October 14, 2013
10:56 AM
Textbook Notes Page 3
You're Reading a Preview

Unlock to view full version