•Economics: The Study of how businesses, people make choices about
oWhat things to produce/consume
•Business: an organization that provides goods or services, to customers, in order to make a profit.
How best to produce things. How best to distribute wealth. MUST PROVIDE PROFIT
•Basic building blocks used to produce anything are called
•**Factors of production**
•Human beings, i.e workers
2. Natural resources
•Raw materials found in the ground, grown from earth, or harvested from nature
•Examples: Coal, wheat, water, wood
•Money or machines and technologies that money can buy
•Examples: Computers, phones, hammers, tractors, snow shovelling
•The people who assemble and organise the other factors of production, the
individuals who make it all happen
5. (Information resources) not in the four factors of procution
•Economic systems: How different countries answer basic economic questions:
•Who should own or control the factors of production?
•What should be produced, with the factors of production?
Types of economies: (Command & Market)
oThe government owns/controls most of the factors of production.
oThe government makes most economic decisions.
oIndividuals owns/control all factors of production
oIndividuals make 100% of economic decisions
•Mixed Market Economies:
oIndividuals own/controls majority of factors
oIndividuals make most of economic decisions
oGovernments regulate and tax, run some business
oExample: Canada, USA, UK, France
•4 Degrees of Competition:
•Lots and lots of suppliers
•All are small
•More or less the same
•Must sell at the same price
•Example: carton of milk
2. Monopolistic Comp.
•Lots and lots of suppliers
•Most are small
•Most more or less the same
•Some are big, can differentiate themselves
•Most sell at the same price
•Big suppliers can charge extra
•Example: coffee shops vs. Starbucks
•Small number of suppliers (4 or 5)
•All are "large"
•Each tries to differentiate itself
•Industry hard to enter, hard to exit
•They watch each other closely
•Example: Canadian banking industry
•Only one supplier
•(By definition) 100% market share
•Can set whatever price it likes
Chapter 2 (Understanding the Environment of Business)
•Gross Domestic Product (GDP): $ value of all goods and services produced in a country in
•Growing GDP: more people making more stuff.
•Falling GDP: fewer people making less stuff. Falling GDP: called “recession”
•GDP/Capita = relative wealth (per capita means per person)
•ability to make things quickly and efficiently
•ratio of inputs (time, $$$) outputs (products/services)
•how many man-hours, $$ or tons of natural resources does it take to make stuff?
•Labour (a key factor of production) is under-utilised.
•Unemployment: People would like to work - but can't find work.
•The unemployed are people who are actively looking for work
•Prices for goods going up
•People can afford to buy less.
•Hurts people on fixed incomes (pensioners)
•Suggests: shortages of things people want
•Approximately 2.4 million businesses in Canada
•Canada is a market economy
oTherefore anyone may start a business without fees, or government permission
•Easy to start a small business and easy for a small business to fail.
•To be incorporated in the registry a business must have
oAt least 1 employee
oAnnual Sales revenues of at least $30,000 or be incorporated
•Small Business: (An owner-managed business with less than 100 employees)
oScale / Importance in Canada:
•The majority of businesses are small businesses (<100 employers)
•Annual contribution has been scaled at 25%
Failure and Success:
% that fail % that fail
Year (Canada) (USA)
2 39 40
5 64 60
10 80 90
New Venture/Firm: A recently formed commercial organization that produces goods/services for sale
•Entrepreneurs: (People who recognize and seize opportunities) are “Internals”
oAssemble and mobilize resources
oRisk tolerance-- assume risks to realize rewards
oRisk intolerance: New or previously unknown situations seen as threatening
oRisk Tolerance People see new or previously unknown situations as desirable
oHigh “Need for Achievement”
o“Needs Motivation” Theory (Three Basic Human Motivations)
1. Need for power (N-Pow)—need to lead
2. Need for affiliation (N-Aff)—need friendly relationships and interactions
with others, and need to be liked and held in high regard. Team players.