Textbook Notes (290,000)
CA (170,000)
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MGTA01H3 (600)
Chapter 1

MGTA01H3 Chapter Notes - Chapter 1: Demand Curve, Perfect Competition, Equilibrium Point

Management (MGT)
Course Code
Chris Bovaird

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Chapter 1 Understanding the Canadian Business System Notes
The Concept of Business and Profit
x business : an organization that seeks to earn profits by providing goods and services
x profit : the money that remains (if any) after a businesss expenses are subtracted from its revenues
x expenses : money business spends producing its goods and services and generally running the business; also referred to as costs
x revenues : money business earns selling its products and services; also referred to as “sales”
x in Canada’s economic system, businesses exist to earn profits for owners who are free to set them up
x in choosing how to pursue profits, businesses must take into account what consumers want or need
x if enterprising business people can identify either unmet needs or better ways of satisfying them, they can be successful
x opportunity always involves goods or services that consumers want or need—especially if no one else is supplying them or if
existing businesses are doing so inefficiently or incompletely
Economic Systems around the World
x economic system : the way in which a nation allocates its resources among its citizens
x economic systems differ in terms of who owns and controls these resources, known as the “factors of production”
Factors of Production
x factors of production : the resources used to produce goods and services: labour, capital, entrepreneurs, and natural resources
x information resources are now often included as a fifth factor of production as well
x labour : the mental and physical training and talents of people; sometimes called human resources
x employees who are well trained and knowledgeable can be a real competitive advantage for a company
x capital : the funds needed to operate an enterprise
x a major source of capital for small businesses is personal investment by owners, which can come from individual entrepreneurs,
from partners who start businesses together, or from investors who buy stock
x revenue from the sale of products is a key and ongoing source of capital once a business has opened its doors
x entrepreneur : an individual who organizes and manages labour, capital, and natural resources to produce goods and services to
earn a profit, but who also runs the risk of failure
Natural Resources
x natural resources : items used in the production of GS in their natural state, including land, water, mineral deposits, and trees
Information Resources
x 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
x much of what a business does results in either the creation of new information or the repackaging of existing information for new
users and different audiences
Types of Economic Systems
x command economy : ES in which gov’t controls all or most factors of production and makes all or most production decisions
x market economy : ES in which individuals control all or most factors of production and make all or most production decisions
Command Economies
x communism : a type of command economy in which the government owns and operates all industries
x socialism : a kind of command economy in which the government owns and operates the main industries, while individuals
own and operate less crucial industries
Market Economies
x market : a mechanism for exchange between the buyers and sellers of a particular good or service
x capitalism : kind of market economy offering private ownership of factors of production and of profits from business activity
Mixed Market Economies
x mixed market economy : ES with elements of both CE and ME, in practice, typical of most nations’ economies
x there are two trends taking placing in such ES: privatization and deregulation
x privatization : the transfer of activities from the government to the public sector
x deregulation : a reduction in the number of laws affecting business activity
x deregulation frees companies to do what they want without government intervention, thereby simplifying task of management
Interactions between Business and Government
How Government Influences Business
Government as Customer
x government buys 1000s of different PS from business firms, including office supplies, office buildings, computers, battleships,
helicopters, highways, water treatment plants, management and engineering consulting services, and advertising
x many businesses depend on government purchasing, if not for their survival, at least for a certain level of prosperity
x government expenditures on GS amount to billions of dollars each year
Government as Competitor
x gov’t competes with business through Crown corporations, which are accountable to minister of parliament for their conduct
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