Textbook Notes (368,531)
Canada (161,958)
Commerce (596)
COMM 103 (179)
Chapter 2

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COMM 103
Gregory Libitz

Chapter Two: The Canadian Economic Environment Canada and its Economic Factors  Canada possesses one of the most fully-developed economic systems in the world o Abundance of resources, better skills, the sophistication of our technology based businesses  Moved from agriculture based, to that of a diversified system whose outputs are sought be consumers around the world  Factors Critical in Ensuring Canada’s Economy remains resilient and competitive o Productivity gains, strong business investment, innovation, wage increases Key Economic Influences Contributing Factors in Economic Development  Development lies within an economic system’s ability to support and promote both the current and future economic activity taking place o The ability to provide a stable environment for economic growth o Ensuring that the required business and mgnt systems are in place to support an organized approach to economic development  Contributing Factors to Economic Development o Political Stability, Factors of Production, Manageable Lvl of National Debt, Monetary Policy and Banking Systems, Lvl of Investment, Inflation Rate, Absence of Corruption, Efficient Legal System, Comparative Advantage Underlying Economic Model Law of Supply and Demand  Refers to the ability of the market, independent of external influences, to determine the price for which a product/service will be bought and sold  Inelastic Demand: Results when movement in price does not severely affect the demand o Change in gas price from 2007 ($0.67) to 2011 ($1.30)  Elastic Demand: Results when quantity demanded changes do to a price change  Supply: How much of a product/service producers are willing to provide at certain prices o Think about production costs vs revenue Allowance for Private Ownership, Entrepreneur, and Wealth Creation  Refers to the openness of the market to support, encourage, and promote the concepts of private enterprise, personal ownership, entrepreneurship, and wealth creation o Differs from country to country ie. U.S. vs. North Korea Government Involvement in Influencing Economic Activity and Direction  Relates to the varying roles which the gov can play within ongoing economic activities o Act as a customer, regulator (restricting access, protocols), a manager (subsidy) Canada – A Mixed Economic System  Economy allows for the law of supply and demand to significantly influence the market  Follow the principles of private ownership, entrepreneurship, and wealth creation  The government gets involved only if they think it is the best interest of the nation in order to protect and regulate industries and/or guide economic activities The Economy in Simple Terms  Expenditures: Purchases you make in support of your daily economic activity, and which are deemed to be of value in meeting your needs & improving your overall quality of life  Savings: Dollars which you set aside today which will support economic activity and wealth creation for the future  Capital Asset Investment: Investments which you are making daily today in order to further expand your capacity to conduct and expand your overall economic capacity  Credit: The borrowing of dollars to support expenditures or investments being made o However, too much debt will hinder economic growth The Economic Growth Cycle  GDP: The total value of a nation’s economy  all activity from individuals, bus., & gov. o The total market value of goods/services a nation produces over a period of time  Factors that affect Economic Growth o Goods/Services produced and purchased domestically o Business investments within the economy o Goods produced for export purposes o Government Spending Economic Growth Cycle (opposite for contraction) Real Wage Gains Purchasing Power Employment which outstrips Inflation Expansion Increased Consumer Economic Expansion Spending Increased Increased Capital Corporate Spending & Profits & Government Governmental Expenditures Tax Revenues Managing the Movement in the Economy  Trying to maintain equilibrium between economic growth & inflation in order to provide an environment which makes the best use of it capabilities of our economic platform  Growth need to be managed in a way which stimulates investment, yet maintains control of inflation and other inefficient economic influencers o Stimulate growth in central and eastern Canada without compromising higher than expected growth rates in western Canada Trends Impacting the Canadian Market Inflation  Robs an economy of true economic growth  As energy becomes more and more needed in production and transportation, costs will increase  consumers will see this in the form of more expensive goods o This same trend can be seen in every industry, for every product Geographic Clustering  Occurs when regional economies develop into what are considered to be distinct from one another, separated by significant enough geographical space where interdependency upon each other in minimized  The danger occurs at the broader macro level, resulting in the inability of governments to infectively control economic expansion or contraction via monetary policy or inflation mechanisms Currency Exchange Rate Impact  Increase in our dollar can have both positive and negative effects on our market o P: Reducing price of importing foreign goods o N: Impacted tourism and manufacturing exports  not as accessible, more expensive vs. other manufacturers Branch Market Impact  In comparison to other countries, Canada’s economy is small  Our natural resource based companies are actively sought after and purchased o One concern is that since foreign firms are buying Canadian companies, we will lose control over our economic base and become a branch market economy  Government is under a lot of scrutiny to stop foreign entities from purchasing Canadian owned business  Have stopped it before Sustainability and Green Issues  Increasing emphasis for sustainability and green issues Positioning and cost advantages o Green products, enviro-friendly packaging, production efficiency, etc. Aging Workforce, Immigration, and Multiculturalism  As baby-boomers start to hit retirement, there is more concern about intellectual capital shortages in: info tech, health care, education, trades  low birth rate  Gov. is turning to immigration of skilled workers to fill these positions o Trying to keep up an image that Canada welcomes all cultures  in order to keep Canada as the preferred choice
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