Term Test 1 Study Guide

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I. Understanding the Canadian Business System
Business a organization that seeks to earn profits by proving goods and services
Capital the funds needed to operate an enterprise
Capitalism an economic system in which markets decide what, when & for whom to produce
Command economy an economic system in which govt controls all or most factors of
production & makes all /most production decisions
Communism a type of command economy in which govt owns & operates all industries
Demand the willingness & ability of buyers to purchase a product /service
Deregulation a reduction in the # of laws affecting biz activity & in power of govt
enforcement agencies
Economic system the way in which a nation allocates its resources among its citizens
Entrepreneur an individual who organizes & manages labour, capital & natural resources to
produce g&s to earn a profit but also runs the risk of failure
Factors of production the resources used to produce goods & services: labour, capital,
entrepreneurs, natural resources
Input market firms buy resources that they need in the production of g&s
Labour (or human resources) the mental & physical training & talents of people
Lobbyist a person hired by a company or an industry to represent its interests to govt officials
Market a mechanism for exchange between the buyers & sellers of a particular good or service
Market economy an economic system in which individuals control all /most factors of
production & makes all /most production decisions
Mixed market economy an economic system with elements of both a command & market
economy; in practice, typical of most nations economies
Nationalization the conversion of private firms into govt-owned firms
Output market firms supply g&s in response to demand of consumers
Privatization the transfer of activities from the govt to the private sector
Profit what remains (if anything) after a businesss expenses have been subtracted from its
Socialism a kind of command economy in which govt owns & operates main industries while
individuals less crucial industries
Supply the willingness & ability of producers to offer a good or service for sale
Trade association an organization dedicated to promoting the interests & assisting the
members of a particular industry
Federal Regulatory Agencies
Canadian Radio-Television and Telecommunications Commission (CRTC) issues & renews
broadcast licenses
Canadian Transport Commission (CTC) makes decisions about route & rate applications for
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commercial air & railway companies
Canadian Wheat Board regulates price of wheat
Canada Water Act controls water quality in fresh & marine waters
Environmental Contaminants Act establishes regulations for airborne substances that are a
danger to human health or the environment
Fisheries Act controls the discharge of any harmful substance into water
Food and Drug Act prohibits the sale of food that contains any poisonous or harmful
Hazardous Products Act requires poisonous, flammable, explosive, or corrosive products to be
appropriately labelled
Textile Labelling Act regulates the labelling, sale, importation, & advertising of consumer
textile articles
Tobacco Act prohibits cigarette advertising on billboards & in stores
Weights & Measures Act sets standards of accuracy for weighing & measuring devices
Progressive revenue taxes taxes levied @ higher rate on higher-income taxpayers & @ lower
rate on lower-income taxpayers
Regressive revenue taxes taxes that cause poorer ppl to pay a higher % of income than richer
ppl pay
Restrictive taxes taxes levied to control certain activities that legislators believe should be
Revenue taxes taxes whose main purpose is to fund govt services & programs
Competition the vying among businesses in a particular market or industry to best satisfy
consumer demands & earn profits
Demand curve graph showing how many units of a product will be demanded (bought) @ diff.
Demand & supply schedule assessment of the relationships among different levels of demand
& supply @ different price levels
Factory system process in which all the machinery, materials & workers required to produce
a good in large quantities are brought together in one place
Industrial Revolution a major change in goods production that began in England in mid-18th
century & was characterized by a shift to factory system, mass production & specialization of
Law of demand the principle that buyers will purchase [demand] more of a product as its
price drops
Law of supply principle that producers will offer [supply] more of a product as its price rises
Market price [equilibrium price] profit-maximizing price @ which quantity of goods
demanded = quantity of goods supplied
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Mass production manufacture of products of uniform quality in large quantities
Monopolistic competition a market/industry characterized by a large # of firms supplying
products that are similar but distinctive enough from one another to give firms some ability to
influence price
Monopoly a market /industry with only one producer who can set price
Natural monopoly market/industry in which having only 1 producer is most efficient bec it
can meet all consumer demand for product
Oligopoly a market /industry characterized by a small # of v. large firms that have power to
influence price of products &/or resources
Perfect competition a market/industry characterized by a v. large # of small firms producing
an identical product so that none of the firms has any ability to influence price
Private enterprise an economic system characterized by private property rights, freedom of
choice, profits & competition
Shortage a situation in which quantity demanded exceeds quantity supplied
Specialization the breaking down of complex operations into simple tasks that are easily
learned & performed
Supply curve graph showing how many units of a product will be supplied @ diff. prices
Surplus a situation in which quantity supplied exceeds quantity demanded
Finance era period during 1980s when there were many mergers & much buying & selling of
business enterprises
Global era emergence of a truly global economy, facilitated by advances in production,
computer tech & communication systems
Internet era rapid growth of internet has opened up new growth possibilities for both small &
large businesses
Marketing era period during the 1950s & 60s when businesses began to identify & meet
consumer wants in order to make a profit
Production era the period during early 20th century when businesses focussed almost
exclusively on improving productivity & manufacturing methods
Sales era period during 1930s & 1940s when businesses focussed on sales forces, advertising
& keeping products readily available
oThe Concept of Business & Profit business, profit, & risk-taking [3 key concepts]
oEconomic Systems Around the World:
A major determinant of how organizations operate is the kind of economic system
that characterizes the country in which they do business. Economic systems differ
in terms of who owns & controls these resources.
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