MGTA03 - Chapter 1
ECONOMICS SYSTEMS AROUND THE WORLD
Economic system: The way in which a nation allocates its resources among
Factors of Production
-The resources used to produce goods and services
- also called Human Resouces
- is the mental n physical training and talents of ppl
- The money needed to operate an enterprise.
- For small companies: major source of capital cn be personal investment
- Revenue cn later become a major source of capital to reuse money to
- A individual who organizes and manages labour, capital and natural
resources to produce goods and services to earn a profit, but who also
runs the risk of a failure.
4. Natural resources
- Are items used in the production of good n services in their natural state.
- Ex. land, water, mineral deposits and trees
5. Information Resources
- Info such as market forecasting, economic data, and specialized
knowledge of employees that is useful to a business and that helps it
achieve its goals.
Types of Economic Systems
1. Command Economy
- An economic system in which Government controls all or most factors of
production and makes all or most production decisions.
- Communism: a type of command economy in which the government
owns and operates all industries
- Socialism: a kind of command economy in which the government owns
and operates the main industries, while individuals own and operate less
2. Market Economy
- An economic system in which individuals control all or most factors of
production and make all or most production decisions.
- Market: a mechanism for exchange between the buyers and sellers of a
particular good or service. - Capitalism: a kind of market economy offering private ownership of the
factors of production and of profits from business activity.
3. Mixed Market Economy
- An economic system with elements of both a command economy and
market economy; in practice, typical of most nations’ economies.
- Ex: most countries of the former Eastern bloc have now adopted market
mechanisms through a process called privatization.
- Privatization: the transfer of activities from the government to the public
- Another trend is deregulation.
- Deregulation: a reduction in the number of laws affecting business
- Deregulation frees companies to do what they want without government
intervention, thereby simplifying the task of management.
INTARACTION BETWEEN BUSINESS AND GOV’T
Government Influencing Business
1. Government as customer
- Gov’t purchases goods from companies to, for ex: build roads, use
helicopters, cars for police etc…
2. Government as competitor
- Gov’t compete with business through Crown corporations, which are
accountable to the minister of Parliament for their conduct.
- Crown corporations exist at both the provincial and federal level.
3. Government as regulator
- Gov’t regulate to:
o Protect Competition
o Protect consumers
o Achieving social goals
o Protecting the environment
4. Government as taxation agents
- Taxes are imposed and collected by federal, provincial, and local
- Revenue Taxes/Income taxes: are levied by governments primarily to
provide revenue to fund various services and programs.
- Progressive Revenue taxes: are levied at a higher rate on higher-income
taxpayers and at a lower rate on lower-income taxpayers.
- Regressive revenue taxes/sales tax: are levied at the same rate
regardless of a person’s income.
- Restrictive taxes/Taxes on alcohol, tobacco, and gasoline: are levied
partially for the revenue they provide, but also because legislative bodies
believe that the product in question should be controlled. 5. Government as provider of incentives
- Federal, provincial, and municipal governments offer incentive programs
that help stimulate economic development.
- Ex: in Québec, Hyundai Motors received $6.4 million to build a production