Textbook Notes (362,880)
Canada (158,081)
MGTA02H3 (361)
Chapter 1

Chapter 1 Notes

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University of Toronto Scarborough
Management (MGT)
Chris Bovaird

Chapter 1 Understanding the Canadian Business System The Concept of Business and Profit TermsBusiness An organization that produces or sells goods or services in an effort to make a profitRevenues The money a business earns selling its products and servicesExpenses The money a business spends producing its goods and services and generally running the businessProfit The money that remains if any after a businesss expenses are subtracted from its revenues Economic Systems around the World TermsEconomic System The way in which a nation allocates its resources among its citizensFactors of production The resources used to produce goods and services labour capital entrepreneurs and natural resourcesLabour Also referred to as human resources labour is the mental and physical capabilities of people An example can be seen in a major corporation All members of the corporation who contribute to running and maintaining the business its liabilities and assets are forms of labourCapital The funds used to operate an enterprise A major source of capital for small businesses is personal investments which can come from individual entrepreneurs from partners who start businesses together or from investors who buy stock Another form of capital can be the revenue that enters the business once it successful enters the economic marketNatural resources Items used in the production of goods and services in their natural state including land water mineral deposits and trees Once just limited to resources that could only be produced in nature it now relates to include all physical resourcesEntrepreneurs The people who accept the opportunities and risks involved in creating and operating businesses An example can be seen in the establishment of Facebook by Mark Zuckerburg who had the technical skills to understand the benefits of connecting to the Internet and realized the potential behind network connections between its users The entrepreneur is able to identify unmet consumer needs such as advertising and selling a good or service The entrepreneur is able to spot a promising opportunity and develop a good plan for capitalizing on itInformation resources information such as market forecasts economic data and specialized knowledge of employees that is used to a business and that helps it achieve its goalsCommand economy an economic system in which government controls all or most factors of production and makes all or most production decisionsMarket economy An economic system in which individuals control all or most factors of production and make all or most production decisionsMixed market economy An economic system with elements of both market and command economiesPrivatization the process of converting government enterprises into privately owned companiesDeregulation reduction in the number of laws affecting business activity Communismtwo basic forms of command economies are communism and socialismoriginally proposed by Karl Marx communism is a system in which the government owns and operates all sources of productionMarx envisioned a society in which individuals would ultimately contribute according to their abilities and receive economic benefits according to their needshe also expected government ownership of production factors to be only temporaryonce society has matured government would wither away and the workers would gaindirect ownership Socialismless extensive command economic system than communismsocialism owns and operates only selected major industriessmaller businesses such as clothing stores and restaurants may be privately ownedworkers in socialist countries are usually allowed to choose their occupationsdespite this a large population generally works for the government Capitalisma kind of market economy offering private ownership of the factors of production and of profits from business activityit is referred to as a political basis of market processes which sanctions the private ownership of the factors of productionencourages entrepreneurship by offering profits as an incentive Interactions between Business and Government How the government influences business Government as customergovernment purchases thousands of different products and services from business firmsthe government is also the largest purchaser of advertisingmany businesses depend on government purchases if not for their survival at least for a certain level of prosperity Government as competitorthe government competes with other business as Crown corporations which are accountable to a minister of Parliament for their conductCrown corporations exist at both the federal and provincial level and account for a significant and wide variety of economic activity in Canada Government as regulatorgovernment regulates business through many administrative boards tribunals or commissionat the federal level examples include the Canadian RadioTelevision 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 which regulates the price of wheatat the provincial level provincial boards and commissions regulate business through their decisionsother several important reason for government regulation on businesses includeprotecting competitionprotecting consumersachieving social goalsprotecting the environment Government as taxation agentrevenue taxes are taxes whose purpose is to fund government services and programsprogressive taxes are levied on a higher rates on higher income tax payers and at lower rate on lower income tax payersregressive taxes are levied at the same rate regardless of persons income fixed raterestrictive taxes levied to control certain activities that legislators believe should be controlled examples include alcohol tobacco and gasoline Government as provider of incentivesgovernment offers incentive programs in order to stimulate the economy Hyundai Motors received 64 million to build a production facility and an additional 682000 in order to train workersgovernment also offers services through government organizations Stats Canada which provides data on Canadian economy
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