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Textbook Summary Chapter 1 A concise, to-the-point summary sheet with no extra examples that the book uses.

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University of Toronto St. George
Rotman Commerce
John Oesch

21.9.10 RSM 100 Y1 Chapter 1 The Concept of Business and Profit Business: An organization that produces or sells goods or services in an effort to make profit. Profit: The remains after a business’s expenses have been subtracted from its revenues. Goals: 1. Businesses exist to earn profits for owners. 2. Businesses produce goods and services. 3. Businesses provide jobs. 4. Businesses create new innovations. 5. Business’s profits increase the personal incomes. 6. Businesses may support charity. Economic Systems Around the World Economic system: The system which allocates the nation’s resources among its citizens. Factors of Production: The basic resources that a business uses to provide goods and services. 1. Labor: Human Workforce. 2. Capital: Financial resources needed to produce goods and services. 3. Entrepreneurs: Leaders who creates and operates the business. 4. Natural Resources: Land and any other raw material extracted from land. 5. Information Resources: Specialized knowledge and expertise such as market forecasts, economic data, etc to help the business achieve it’s goal. 21.9.10 Types of Economic Systems Command Economy: Centralized government decides how to allocate the resources. Communism and Socialism. Market Economy: Individuals allocate resources through the market activities. Capitalism. Mixed Market Economy: A mixture in which elements of a command economy and a market economy are evident. Input Market: Firms buy resources that they need in the production of goods and services. Output Market: Firms supply goods and services in response to demand on the part of consumers. Circular Flow: Capitalism: Markets decide what, when and for whom to produce. 21.9.10 Interactions Between Business and Government 1. Government Influencing Business a. Government as a customer. b. Government as competitor. c. Government as regulator. i. Promoting competition ii. Protecting consumers iii. Achieving social goals to promote well-being of citizens iv. Protecting environment d. Government as taxation agent. e. Government as Incentives (Subsidy) f. Government as providers of services 2. Business Influencing Government a. Lobbyists b. Trade associations c. Advertisements The Canadian Market Economy Demand: Willingness and ability of buyers to purchase a product. Supply: Willingness and ability of producers to offer a product.
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