A+ Notes: MGTA03 Ch 1-2

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1 Oct 2011

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business – org’n that produces or sells G/S for a profit
def. of profit, expenses (costs), revenues
profit is fundamental reason for business to exist
loss when lack of rev or too high expenses
non-profit org’n surplus (dep. on motive, doesn’t make anyone rich)
economics – study of how businesses, ppl make choices about
what, how & for whom to produce G/S
economic system – way of resource allocation
command (N. Korea), socialist (Cuba), mixed market (Can.), market
socialism inefficient gov’t enterprises, high taxes to support public welfare systems
mixed trend towards privatization, deregulation
factors of production (5) – labour, capital, natural resources, entrepreneur, info resources
market – exchanges b/w buyers and sellers (not physical place)
law of demand/supply, equilibrium price, surplus & shortage
gov’t influence on business (5)
1) as competitor 2) as customer
3) as regulator protect competition, consumers, enviro & achieve social goals
4) as taxation agent (revenue vs restrictive, progressive vs regressive)
5) as provider of incentives 6) provider of essential services
private enterprise system – allows indiv. persuade of interest w/ min. gov’t interference
private property rights, freedom of choice, profits, competition
degrees of competition:
perfect comp.
monopolistic comp.
natural monopoly – having 1 producer is most efficient because it can meet all demand
purpose of economic sys. to assemble/organize resources (f.of.p) to make things ppl want, creating profits
for business, so everyone is better off
external enviro – everything outside org’n that can affect it (incl. economic enviro)
Key goals of economic system: economic growth, economic stability, full employment
Economic Growth:
business cycle – peak, recession (depression), trough, recovery
aggregate output – total quantity of G/S produced
as output per capita = more G/S that ppl want = higher standard of living
standard of living – total quantity and quality of G/S citizens can buy
GDP, GNP, Genuine Progress Indicator (GPI)
real growth rates- adj. for inflation and value of currency
GDP per capita
real GDP (adj. for currency values & price changes) vs. nominal GDP (current $)
purchasing power parity – ex. rates set so that price of similar product in diff. country is about the same
PPP measures standard of living
Productivity = how much produced / resources needed to produce
real growth in GDP reflects increase prod’y
standard of living improves only when prod’y increases
balance of trade = exports – imports
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