Understanding the Canadian Business System
Defining the nature of Canadian Business and its main goals.
Business:An Organization that seeks to earn profits by providing goals and services.
Profit: The money that remains (if any) after a business’s expenses are subtracted from its
Loss: When expenses are greater than revenues
i.e. It costs more money to produce the products and run the business, than the business can generate
Expenses: The money a business spends to produce its goods and services and run the business.
Revenues: The money a business earns by selling its products and services. (= sales)
*Profit rewards the owners of business for taking the risks involved in investing their time and
money. Business is linked to Customer Needs and Wants.
Different types of global economic systems (Input/output markets to Factors of Production)
The way in which a nation allocates its resources among its citizens.
Factors of Production
- The basic resources that a country’s businesses use to produce goods and services.
1. Labor (= human resources)
- The mental and physical capabilities of people.
2. Capital 자본금 자산 밑천 , )
- The financial resources (or funds) needed to operate an enterprise. To keep, run, grow.
(Assets etc.) Revenue is the key and ongoing source of capital once business has opened.
3. Entrepreneur (기업가 창업가, etc)
- 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.
4. Natural resources (tangible)
- Items used in the production of goods and services in their natural state, including land, water,
mineral deposits, and trees. (all physical resources)
5. Information resources (intangible)
- Information such as market forecast, economic data, and specialized knowledge of employees
that is useful to a business and that helps it achieve its goals. Types of Economic Systems
Different Economic systems manage the factors of production in different ways – either the
ownership is private or government own the F of P. It also differs in the way that decisions are
made about production and allocation.
Command economy (or planned)
An economic system in which government controls all or most factors of production and makes
all or most production decisions.
Two most basic forms of Command economy.
Karl Marx with his communism
*Marx envisioned a society in which individuals would ultimately contribute according to their
abilities and receive economic benefits according to their needs. Government ownership
temporary. Once society had matured, government would ‘wither away’ and workers would get
direct ownership. – it didn’t work out
*the government owns and operates only selected major industries. Smaller business may be
privately owned. (although workers in socialist countries are usually allowed to choose their
occupations and professions, but a large proportion work for government.)
*Government-operated enterprises are inefficient because of the political reasons rather than
ability. Popularity is declined in socialism.
Market economy (Definition of Market = A mechanism for exchange between the buyers and
sellers of a particular good or service.)
An economic system in which individuals control all or most factors of production and make all
or most production decisions.
How Market Economy works – Both buyers and sellers enjoy freedom of choice.
Amarket is not a place, it is a bunch of activities. 2 Types of Market Economy
Capitalist Economy: All factors of production owned by private individuals, the state plays no
role in making economic decisions.
A kind of market economy offering private ownership of the factors of production and of profits
from business activity. (The political basis of market process which sanctions the private
ownership of F of P and offer profits as an incentive).
Mixed Economy: Private individuals own/control the majority of the factors of production,
including principal industries, makes most of the economic decisions.
- Mixed Market Economy: An economic system with elements of both a command economy
and a market economy; mostly adapted system.
*In reality, most countries rely on some form of mixed market economy – feature characteristics
of both command and market economies.
*Privatization: The transfer of activities from the government to public sector. : which is…
The process of converting government enterprises into privately owned companies.
*Canada has recently privatized its air traffic control system.
-> In each case, the new enterprise reduced its payroll, boosted efficiency and productivity, and
quickly became profitable.
*Deregulation:Areduction in the number of laws affecting business activity. \
Interactions between business and government
Government buys all different kinds of products and services form business firms. The
government is also the largest purchaser of advertising in Canada. Many businesses depend on
government purchasing. – Government expenditures on goods and services amount to billions
of dollars each year.
Government competes with business through Crown corporations (=A government owned
corportation, government business enterprise is a legal entity created by a government to
undertake commercial activities on behalf of an owner government).
Government (provincial and federal) regulates many aspects of business activity –
administrative boards, tribunals, or commissions. In order to – protect competition, protect
consumers, achieve social goals, protect the environment.
Taxes are imposed and collected by federal, provincial, and local governments.
Revenue taxes: Taxes whose main purpose is to fund government services and programs.
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 are levied at the same rate regardless of a person’s income
which means that it cause poorer people to pay a higher percentage of income than richer people
Restrictive taxes: taxes for those products in question. Taxes levied to control certain activities
that legislators believe should be controlled.
Provider of Incentives
Offer incentive programs that help stimulate economic development. In Quebec, for example,
Huyndai Motors received $6.4 million to build a production facility and $682,000 to train the
workers. (it may or may not cause difficulties or stimulating the economy)
Federal – Highways, the postal services, the minting of money, armed forc