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Chapter 1

Chapter 1 Study Notes


Department
Management (MGT)
Course Code
MGTA01H3
Professor
Chris Bovaird
Chapter
1

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MGTA03Chapter1
StudyNotes
Definitions:
Business:anorganizedeffortwhereaproduct/serviceisproducedtomeeta
demand,andissoldtocustomer/clientsforaprofit.
Revenue:(alsoreferredtoassales)incomingmoneyfromtheservice/product
beingsold
Expenses: (alsoreferredtoascosts)moneyspenttoproduceproduct/service
Profit:Themoneyin,oncecostshavebeensubtracted
 Revenue(sales)Expenses(costs)
Loss:  Existswhenexpensesaremorethansales
Economics: Studyofhowbusinessesmakechoicesregardingwhattoproduce,the
bestwaytoproduceit,andthebestwaytodistributethewealth
FactorsofProduction:basicbuildingblocksusedtoproduceanything
NaturalResources,Labour,Capital,Entrepreneurs
EconomicSystems:fancywayofsaying“Country”
Command/PlannedEconomies:Gov’tmakesmostdecisions&isincontroloffactorsofproduction
MarketEconomies:individualsmakemostchoices&controlfactorsofproduction(Gov’tdoesn’tcare)
CapitalistEconomies:Individualsownallfactorsandmakealldecisions(noneexisttoday)
MixedMarketEconomy:Majorityoffactorsofproductionownedprivatelyandthechoices
regardingthemaremadebyindividuals,butGov’tdoesinterveneandisinvolvedthroughtaxes
PlannedEconomies;
CommunistEconomies:Gov’tcontrolsallfactorsofproduction&makesalleconomicdecisions
SocialistEconomies:Gov’tcontrolsmajorityoffactorsofproduction,butnotall.
Market:  Notaplace,butratherexchangesbetweenbuyersandsellers.
LawofSupply: Producerswilloffer/makemoreproductastheycansellitforahigher
priceandoffer/makelessproductastheycansellitforalowerprice
LawofDemand:Consumerswillbuymoreproductatalowerprice,andmoreproductat
ahigherprice
Notes:
r ExamplesofBusinessesareTimHortons,Microsoft,GM,etc.Theyallareorganizedefforts
whichselltheconsumer/customertheirproduct.ThepurposeforaBusinesstoexististo
provideaservice/productandgainaprofitindoingso.
r NotallorganizedeffortsareBusinesses.Examplesoftheseare,hospitals,universities,
churches,etc.TheseDOprovideaservice,buttheyDONOTINTENDongainingProfit.
r Lossesexistwhentheproduct/servicescostMOREtomakethanthebusinesscanmakein
sales
r FactorsofProductionNaturalResources=RawMaterials
Labour=HumanWorkers
Capital=Moneyormachines/techmoneycanbuy
Entrepreneurs=peoplewhoorganizetheotherFactorsof
Production
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