A business is an organization that produces or sells goods and services in an effort to make a
profit. A profit is what remains after expenses have been subtracted from the revenues. Expenses
is the money a business spends to produce its goods and services to run the business; also known
as costs. Revenues is the money a business earns by selling its products and services; also known
as sales. Someone who can spot an opportunity and then develop a good plan to capitalize on it
can succeed. Business produce most of the goods and services we use, employ people, create new
innovations, provide opportunities for other businesses/ suppliers, enhances quality of life. Profits
helps owners earn money and the taxes help support government while others support charities.
Expenses (costs) - Revenues (sales) = Profit (reward)
Economic systems: An economic system allocates a nation's resources among its citizens. The key
difference between economic systems is the way in which they manage the factors of production.
Factors of production are the resources used to produce goods and services: labour, capital,
entrepreneurs, natural resources and information resources or technology.
Labour: The mental and physical training and talents of people; human resources. Example:
Imperial Oil is a huge company that requires a wide labour force with variety of skills such as
managers, geologists, truck drivers etc.
Capital: The funds needed to operate an enterprise. Obtaining and using labour and other
resources requires capital. A major source of income for small businesses is personal
investment by owners. The investments can also come from individual entrepreneurs,
partners, or stock investors. Revenue from the sales is the key and source of capital once a
Entrepreneurs: They are the individuals who organize and manage labour, capital, and
natural resources to produce goods and services to earn profit; also run a risk of failure.
Jimmy Pattison is a Canadian entrepreneur.
Natural resources: Items used in the production of goods and services in their natural state
including land, water, minerals, trees etc. Imperial oil uses large quantities of crude oil to
process but it also needs land where the oil is located and for refineries and pipelines.
Information resources: Information such as market forecasts, economic data, and
specialized knowledge of employees that is useful to a business and that helps it achieve its
goals; technology. AOL is in the information business. It provides online services for its
subscribers in exchange for a fee.
Types of Economic systems:
Command economy: The government controls all or most factors of production and makes
all or most production decisions; relies on central government.
Communism: A type of command economy in which the government owns and
operates all industries. Proposed by Karl Marx in the19th century; wanted individuals
to contribute according to their abilities and receive economic benefits; expected the
governments to temporarily take ownership of production factors; things didn't got
Socialism: A kind of command economy in which the government owns and operates
the main industries while individuals own and operate less crucial industries such as
restaurants etc. Large proportion of people work for government; many government-
operated enterprises are inefficient as management positions are filled with political considerations; extensive public welfare systems result in high taxes; popularity is
Market economy: The individuals control all or most factors of production and make all or
most f the production decisions.
Market: A mechanism for exchange between the buyers and sellers of a particular
good or service. Sellers are free to charge what they want wile buyers are free to buy
what they choose.
Capitalism: A kind of economy offering private ownership of factors of production and
of profits from business activity. The economic basis of market processes is the
operation of demand and supply.
Mixed market economy: An economic system in with elements of both a command
economy and a market economy: in practice, typical of most nations' economies.
Privatization: The transfer of activities from the government to the public; spreading
to many countries in recent years; e.g. Canada has privatized its air traffic control
system. The new enterprise reduced its payroll, boosted efficiency and productivity,
and quickly became profitable.
Deregulation: A reduction in the number of laws affecting business activity; frees
companies to do what they want without government intervention and simplifies
management; evident in many industries such as airlines, pipelines, baking, trucking,
In Canada: How government influences business
Government as customer: Government buys thousands of different products and services
from business firms, including office supplies, office buildings, computers, battleships,
helicopters, highways, water treatment plants, and management and engineering consulting
services; also larger purchaser of advertising; many businesses depend on government
purchasing; amounts to billions of dollars each year.
Government as competitor: competes with business through Crown corporations who are
accountable to a minister of parliament for their conduct; exist at both federal and
provincial level; account for wide economy activity.
Government as regulator: Federal and provincial both regulate; Government regulates
through many administrative boards, tribunals or commission; Examples at federal level
include Canadian Radio television and telecommunications Commission (CRTC), which issues
and renews broadcast licenses, the Canadian Transport Commission (CTC), which makes
decisions about route and rate applications for commercial air and railway companies, and
the Canadian Wheat Board (CWB) regulates the prices of wheat. Provincial boards and
commissions also regulate business through their decisions; people sometimes feel its
unfair. Reasons to regulate include: protecting competition, protecting consumers,
achieving social goals, and protecting the environment.
Government as taxation agent: Taxes are imposed and collected by federal, provincial, and
local governments. Revenue taxes are the taxes whose main purpose is to fund
government services and progress such as income taxes. Progressive revenue taxes are the
taxes leveled at a higher rate on higher-income taxpayers and at a lower rate on lower
income taxpayers. Regressive revenue taxes are the taxes that cause poorer people to pay a
higher percentage of income than richer people pay such as sales tax. Restrictive taxes are
the taxes leveled to control certain activities that legislators believe should e controlled such
as taxes on alcohol, tobacc