Textbook Notes (280,000)
CA (170,000)
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MGTA01H3 (600)
Chapter 1

MGTA01H3 Chapter Notes - Chapter 1: Oligopoly, Monopolistic Competition


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

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MGTA03H3 F - LEC 01 Monday, September 14. 2009
Chapter 1 - Understanding the Canadian Business System
The Concept of Business and Profit
Business – an organization that seeks to earn profits by providing goods and services.
Profit – the money that remains (if any) after a business’s expenses are subtracted from
its revenues.
Loss – expenses > revenues
Expenses (costs) – the money a business spends producing its goods and services and
generally running the business.
Revenues (sales) – the money a business earns selling its products and services.
Profit/Loss = Revenue(sales) – Expenses(costs)
- Profits reward the owners of businesses for taking the risks involved in investing
their time and money. These amounts can vary depending on their success.
- Most profitable companies of 2005: 1) Royal Bank of Canada ($3.3 billion)
2) Manulife Financial ($3.2 billion)
3) Imperial Oil Ltd. ($2.6 billion)
- In Canada’s economic system, businesses exist to earn profits for owners who
are free to set them up.
- With consumers having freedom of choice businesses must consider what
consumers want or need by either finding ummet consumer needs or better ways
of satisfying consumer needs.
- No matter how efficient a business is, it won ‘t survive if there is no demand for
its goods/services.
- Businesses produce most of the goods/services we consume and employ the
majority of working people.
- They create most new innovations and provide opportunities for other businesses
that serve as their suppliers.
- Healthy business climate contributes directly to our quality of life and standard of
living.
- Technology, service businesses and international opportunities promise to keep
production, consumption and employment growing.
- Profits benefit owners, stockholders, governments (who receive business tax)
and often charaties.

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MGTA03H3 F - LEC 01 Monday, September 14. 2009
Chapter 1 - Understanding the Canadian Business System
Economic Systems Around the World
Economic System – the way in which a nation allocates its resources among its citizens.
They differ in terms of who owns and controls these resources, known as the “factors of
production”.
Factors of Production
Factors of Production – the basic resources a country’s businesses use to produce
goods and services: labour, capital, entrepreneurs, and natural resources. Information
resources are now often include as a 5th factor of production as well.
Labour (human resources) – the mental and physical training and talents of people.
- Labour force can range from managers to geologists to truck drivers depending
on the company.
- Employees who are well trained and knowledgeable can be a real competitive
advantage for a company.
Capital – the funds/financial resources needed to operate an enterprise.
- You need capital to start a new business and then to keep it running and
growing.
- A major source of capital is personal investment by owners.
- Investment can come from individual entrepreneurs/partners who started the
business/investors who buy stock.
- Revenue is a key and ongoing source of capital.
Entrepreneurs – an individual who organizes and manages labour, capital, and natural
resources to produce goods and services to earn a profit, but also runs the risk of
failure.
- Jimmy Pattison and Izzy Asper (died 2003) are well-known Canadian
entrepreneurs.
- AOL was started by James Kimsey who had good technical/conceptual skills.
Natural Resources – items used in the production of goods and services in their natural
state, including land, water, mineral deposits, and trees.
Information Resources – information such as market forecasts, economic data, and
specialized knowledge of employees that is useful to a business and that helps it
achieve its goals.

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MGTA03H3 F - LEC 01 Monday, September 14. 2009
Chapter 1 - Understanding the Canadian Business System
- America Online (AOL) is in the information business by providing numerous
services online for its subscribers in exchange for monthly access fees.
Types of Economic Systems
- Economic systems can differ from one another through ownership and the way
decisions are made about production and distribution.
-There are 3 types: command, market, mixed market
Command Economy – an economic system in which government controls all or most
factors of production and makes all or most production decisions.
- Two basic forms of command economies are communism and socialism.
- In a command economy: 1) Individuals can be told where and where not to work
2) Companies are told what and what not can be
manufactured
3) Consumers have little or no choice as to what they
purchase or how much they pay for items
-Communism – a type of command economy in which the government owns and
operates all industries and sources of production.
- Karl Marx who proposed the communism system envisioned a society in which
individuals would contribute according to their abilities and receive economic
benefits suiting their needs and also expected government ownership of
production factors to only be temporary until the society matures.
- Karl’s prediction was wrong and now most countries have abandoned
communism for a more market-based economy.
-Socialism – a kind of command economy in which the government owns and
operates the main industries, while individuals own and operate less crucial
industries. This type of economy is losing its popularity.
- In socialist countries, a large proportion usually works for the government.
- Many government-operated enterprises are inefficient, since management
positions get filled based on political considerations over ability.
- Extensive public welfare systems have also resulted in high taxes.
Market Economy – an economic system in which individuals (producers and
consumers) control all or most factors of production and make all or most production
decisions.
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