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MGTA01H3 (583)
Chapter 1

MGTA01 Chapter 1 reading notes

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University of Toronto Scarborough
Management (MGT)
Chris Bovaird

Business Chapter 1 Reading Notes - Business : an organization that produces or sells goods or services in an effort to make a profit - Profit: is what remains after a business’s expenses have been subtracted from its revenues - Expenses: the money a business spends producing its goods and services and generally running the business.Also referred to as “costs” - Revenues: the money a business earns selling its products and services. Also referred to as “sales” - In choosing how to pursue profits, businesses must take into account what consumers want or need - Businesses produce most of the goods and services we consume and employ the majority of working people - An economic system allocates a nation’s resources among its citizens - Factors of production: the basic resources that a country’s businesses use to produce goods and services - Traditionally economists have focused on four factors of production: labor, capital, entrepreneurs, and natural resources - Labour: the mental and physical training and talents of people; sometimes called human resources - Capital: the funds needed to operate enterprise - Amajor source of capital for small businesses is personal investment by owners - Investment can come from individuals, entrepreneurs, from partners who start businesses together, or from investors who buy stocks - Entrepreneur: an individual who organizes and manages labor, capital, and natural resources to produce goods and services to earn a profit, but who also runs the risk of failure - Natural resources: items used in the production of goods and services in their natural state, including land, water, mineral deposits and trees - 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 - Businesses heavily rely on market forecast, the specialized expertise and knowledge of people and various forms of economic data for much of their work - Command economy: an economic system in which government controls all or most factors of production and makes all or most production decisions 1 - Market economy: a n economic system in which individuals control all or most factors of production and make 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 crucial industries - Market: a mechanism for exchange between the buyers and sellers of a particular good or service - Both buyers and sellers enjoy freedom of choice o If both vendors apples are of the same quality, the customer will by the cheaper ones but if the $1.50 apples are fresher, the customer may buy them instead - Capitalism: a kind of market economy offering private ownership of the factors of production and of profits from business activity - Mixed market economy: an economic system with elements of both command economy and market economy; in practice, typical of most nations; economies - Privatization the transfer of activates from the government to the public sector - Deregulation: a reduction in the number of laws affecting business activity o Evident in many industries including airlines, pipelines, banking, trucking and communication - Many business depend on government purchasing, if not for their survival, at least for a certain level of prosperity - Governments also competes with business through Crown corporations, which are accountable to minister of parliament for their conduct - Governments regulates business through many administrative boards, tribunals, or commissions o E.g. At federal level Canadian Radio-television and Telecommunications Commission (CRTC), which issues and reviews 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 which regulates prices of wheat - Important reasons for regulating business activity o Protecting competition, protecting consumers, achieving social goals, and protecting the environment - Revenue taxes: taxes whose main purpose is to fund government services and programs 2 - Progressive revenue taxes: taxes levied at a higher rate on higher-income taxpayers and at a lower rate on lower income taxpayers - Regressive revenue taxes: taxes that cause poorer people to pay higher percentage of income than rich people pay - Restrictive taxes: taxes levied to control certain activities that legislators believe should be controlled - All levels of government offer incentive programs that help stimulate the economic development o E.g. in Quebec, Hyundai Motors received $6.4 million to build a production facility and an additional $683,000 to train workers - Governments also offer incentives thorough the many services they provide to business firms though government organizations o E.g. statistics Canada which provides data and analysis on almost every aspect of Canadian society - Amarket economy consists of many different markets - Demand: the willingness and ability of buyers to purchase a product or service - Supply : the willingness and ability of producers to offer a good or service
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