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ANTA02H3 (146)
Chapter 2

Chapter 2 Business Enviroment.docx

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Chris Bovaird

Economic Environment – Conditions of the economic system in which an organization operates. (Basically the characteristics of this business) Example: McDonalds is characterized by modern growth, moderate unemployment, and low inflation External Environment – Everything outside the organization’s boundaries that might affect it Example: Change in Government, Competitors upgrading Economic Growth Business Cycle – Pattern of short-term ups and downs in an economy, to Measure Economic Performance, it’s mostly measures the Gross Domestic Product (GDP) Business cycle consists of Peak (Highest), Trough (Positive Turnaround), Recession (Down), and Recovery (Up after depression or trough) Recession – Is when the GDP falls 2 consecutive quarters Depression – Long period of rescission Aggregate Output – Total quantity of goods and services produced over a certain period of time Standard of living – The total quantity and quality of goods available for purchase GDP: Value of all goods and services produced in a country in one year (Domestic or Foreigners) GNP: Value of all goods and services produced by citizens of a country, on its land or on foreign land The larger the GDP the more workers, using the resources, are producing more things of value. N: Countries with the highest GPA: USA, China, Japan, And Canada (10) China has been growing 10% annually GDP every year (Really high) (8 overall because small countries are more vulnerable to increase) Canada and USA grows a 1-4% Real Growth Rate – The inflation (rise) and changes in the value of the country’s currency GDP per Capita – GDP per person GPA per captia leaders: Luxembourg, Norway, Switzerland, USA (6), Canada (8) Nominal GDP is the value of GDP simply as it is measured. Ex. Price of bike changed from 100 to 120 next year but sales are still the same. Adds even if inflation (Bike didn’t get better, inflation was higher) Real GDP – GDP calculated to account for changes in currency value and price changes. Real GDP doesn’t count Inflation (but instead the aggravated output) Ex. If a pizza was sold for $10 and 1000 were sold in 2005 and if a pizza was sold for $11 and 1000 were sold in 2006. This doesn’t mean the Economy is doing better. (Total income from sales/inflation rate) Productivity – measures of economic growth that compares how much a system produces with the resources (human and capital) needed to produce it. Ex. Automated equipment such as a soft drink bottling operation, the productivity is high because there are few workers but large amount produced) Productivity = Outputs (products/services)/inputs (people and $$$) Better education, better trained labour, better technology = Better Productivity Balance of trade – the total of a country’s exports (sales to other countries) minus its imports (purc
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