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MGTA02H3 (363)
Chapter 1

MGTA04 chapters 1 and 2.doc

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Department
Management (MGT)
Course
MGTA02H3
Professor
Chris Bovaird
Semester
Fall

Description
~MANAGEMENT REVIEW~ Chapter 1 and Chapter 2 Part 1: Introducing the Contemporary Business World Chapter 1: Understanding the Canadian Business System 1. The Concept of Business and Profit Business : an organization that produces and/or sells goods or services in an effort to make a profit Profit: what remains after a business’ expenses have been subtracted from it’s revenues (expenses-revenue=profit!) • Businesses wouldn’t exist if there was no demand in the market, no matter how efficient the company is • Businesses produce most of our goods and services along with employing majority of working people • New forms of technology, services, and international opportunities promise to keep production and consumption and employment growing indefinitely 2. Economic Systems and Around the World Economic System : the way a nation allocates its resources among its citizens; differs in unions, who owns and controls the resources [FOP] Factors of Productions : resources used to produce goods and services • Labour: mental and physical labour of people, a wide variety of skilled people to keep the company up • Capital: financial resources needed to operate an enterprise, need it to start a business and keep it running • Natural Resources: items used in the production of goods and services in their natural state; (land, water, minerals, trees) • Entrepreneurs: an individual who organizes and manages labour, capital and natural resources to produce goods and services to earn a profit but also risks failures • Information Resources: ( not a big rol) information such as market forecasts, economic data and specialized knowledge of employees that are useful to help achieve goals. Information resources (don’t need to know) Types of Economic Systems • Different types of economic systems manage the FOP in different ways; privately and publicly owned; the way that decisions are made about productions and allocations Command Economies: the government owns and operates ALL industries • Communism and Socialism [2 basic forms]  Karl Marx’s Communism: a society in which individuals would ultimately contribute according to their own abilities and receive economic tax benefits according to their needs  Socialism: a less extensive command system. Government owns the major industries, large proportion works for the government which results in higher taxes Market Economies: a mechanism for exchange between buyers and sellers of a particular good or service, i.e. both buyers and sellers have freedom of choice, overpricing, and selling group • Capitalism: a type of market economy offering private ownership of the factors of production and of profits from business activity • Mixed Market Economy: a system featuring characteristics of both command and market economies ⇒ Most countries of the eastern bloc have adopted this Privatization: the transfers of activity from the government to the public sector, i.e. postal code=government air traffic ⇒ Another trend is deregulation, which is the reduction in the number of laws affecting business activity, i.e. airlines, pipelines, banking, trucking Interactions Between Businesses and Governments How Government Influences Businesses • Government as a Customer: buy thousands of different products and services from business firms, i.e. office supplies, buildings, computers, etc. ⇒ Leading purchaser in Canada, a number of different businesses depend on the governments purchases • Government as a Competitor: competes with businesses through crown corporations; account for a significant and wide variety of economic activity for Canada • Government as a Regulator: the government regulates businesses through many administrative boards, tribunals or commissions ⇒ Reasons: protecting competition, consumers, the environment, achieve social goals • Government as a Taxation Agent: imposed and collected by the governments, federal, provincial and municipal ⇒ Revenue Taxes (Income Taxes): provide to fund for various services and programs ⇒ Progressive Taxes: levied at a higher ratio on higher income taxpayers, and levied at a lower ratio on lower income taxpayers ⇒ Regressive Taxes: (sales tax): taxes levied at the same rate regardless of the persons income ⇒ Restrictive Taxes: taxes on alcohol, tobacco, gas because legislative bodies believe they should be • Government as a Provider of Incentives: to businesses in need and firms that provide through government organizations ⇒ tax rebates, assistance programs, tariffs • Government as a Provider of Essential Services: highways, roads, postal services, armed forces, hospitals, etc. 3. The Canadian Market Economy Demand and Supply in the Market Economy Laws of Supply and Demand Demand: the willingness and the ability of buyers to purchase a good or service Supply: the willingness and the ability of producers to offer a good or service for sale • BASIC LAWS AS FOLLOWS ⇒ Law of Demand: buyers will purchase (demand) more of a product as its price drops, and will purchase (demand) less of a product as its price increases ⇒ Law of Supply: producers will offer (supply) more of a product for sale as its price rises, and will offer (supple) less of a product for sale as its price falls The Demand and Supply Schedule Demand and Supply Schedule: assessment of the relationship between different levels of demand and supply at different price levels • DEMAND AND SUPPLY CURVES ⇒ Demand Curve: shows the number of products that will be demanded/bought at different prices ⇒ Supply Curve: shows how many products will be supplied/sold and different prices ⇒ Market Price/(Equilibrium Point): price at which the quantity of goods demanded and supplied are equal Surpluses and Shortages Surplus: when quantity supplies exceeds the quantity demanded Shortage: when quantity demanded exceeds the quantity supplied 4. Private Enterprise and Competition in a Market Economy A private enterprise requires the presence of four different elements
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