COMM 103 Chapter Notes - Chapter 2: Foreign Direct Investment, Comparative Advantage, Management System
24 Aug 2016
School
Department
Course
Professor
Comm 103
Brittney Gerlock
Business: Chapter Two Notes !
Canada and Its Economic System!
•a surplus results when export exceed imports
•productivity gains, strong investment, innovation, moderate wage increases, and a
favourable exchange rate = Canada’s economic resiliency and competitiveness
•G7/8: quasi-organization of world’s major developed economies; discusses major
economic, political & societal issues
Key Economic Influencers!
•Stable & growing economies are created through economic management systems & a
focus on both current & future economic activity
!-political stability
!-established FOP
!-manageable levels of debt
!-national monetary policy & banking system
!-low inflation
!-effective legal system
!-sufficient levels of investment
!-absence of corruption
!-comparative advantage (ability of a country to product/supply goods or services at !
!a lower cost than other countries; possessing resources/services that are ! !
!unavailable elsewhere)
Foreign Direct Investment: when a company/individual from one country invests in a
business in another country
The Underlying Economic Model
Three major market composition principles
•can be viewed on continuum b/w open system and controlled/planned system
(operates with minimal/no external trade)
Mixed economic system: contains components of both controlled & open systems (ex.
Canada)
1. the law of supply and demand
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Comm 103
Brittney Gerlock
•ability of the market to determine the price for which a product/service will be bought
and sold
•relationship b/w Q supplied and Q demanded
•at eq, no shortage/surplus of goods
•in the absence of external influence, market corrects itself to eq
•Demand (# of purchasers who will pay at given P)
!-negative slope
!-elastic: change in P = significant change in Q demanded
!-inelastic: change in P = minimal change in Q demanded
•Supply (amount of product/service suppliers are willing to provide at given P)
!-positive slope
!-cost of production vs revenue
2. allowance for private ownership, entrepreneurship & wealth creation
•openness of the market to support, encourage & promote these concepts
3. extent of gov involvement in economic activity
•role as customer, regulator, manager (crown corp), taxation agent, and/or competitor
The Economy!
Economic activity & growth are based on:
1. Expenditures
•purchases of day-to-day activity
2. Savings
•dollars set aside for future economic activity & wealth creation
3. Capital asset investments
•investments made to expand capacity & productivity
4. Credit
•borrowing of dollars to support expenditures/investments
The Economic Growth Cycle!
GDP: total market value of the goods & services a national produces domestically over
time
•track the movement of GDP to determine whether an economy is growing/shrinking
Recession: period of time that marks a contraction in overall economic activity
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Key economic in uencers: stable & growing economies are created through economic management systems & a focus on both current & future economic activity. Comparative advantage (ability of a country to product/supply goods or services at a lower cost than other countries; possessing resources/services that are unavailable elsewhere) Foreign direct investment: when a company/individual from one country invests in a business in another country. Three major market composition principles can be viewed on continuum b/w open system and controlled/planned system (operates with minimal/no external trade) Mixed economic system: contains components of both controlled & open systems (ex. Elastic: change in p = signi cant change in q demanded. Inelastic: change in p = minimal change in q demanded: supply (amount of product/service suppliers are willing to provide at given p) Gdp: total market value of the goods & services a national produces domestically over time track the movement of gdp to determine whether an economy is growing/shrinking.
