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Chapter 1

Study Guide to Chapter 1

Management (MGT)
Course Code
H Laurence

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Chapter 1: Understanding The Canadian Business System
The Concept of Business and Profit:
Business: an organization that produces or sells goods or services in an
effort to make a profit.
Profit: is what remains after a businesss expenses have been
subtracted from its revenues. (Reward for the owner who put in their
time and money)
Expenses: money a business spends producing its good and services
and generally running the business. Also referred to as “costs
Revenues: the money a business earns selling its products and services.
Also referred to as sales
Exist to earn profits for the owners who set them up.
Need to take into account what consumers want and need.
Needs a demand, in order to survive
Produce most of the goods and services we consume and employ a
majority of working people
Contributes to the quality of life and standard of living
New forms of technology, service businesss and international
business/opportunities keep production, consumption and employment
Economic systems around the world:
The economic system: the way in which a nation divides and
distributes its resources among its citizens.
The economic system of a country affects and determines the way in
which a business operates.
They differ depending on who owns and controls the factors of
Factors of Production: the resources used to produce goods and
services. Each country manages the factors of production differently.
o1. Labor:
People who work for a company sometimes called human
The mental and physical capability of people
Labor forces require may ranges of skilled workers
Well trained workers are a competitive advantage to
o2. Capital:
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The financial resources needed to operate an enterprise-
to run operations, start business, keep it running and
Sources: for small business, personal investments from
owners, partners, entrepreneurs, investors who buy
Once a business has started, revenue is a key source of
o3. Entrepreneurs:
An individual who organizes and manages labor, capital
and natural resources to produce goods and services to
earn a profit but who also run the risk of failure.
o4. Natural Resources:
Items used in the production of goods and services in the
natural state. E.g. land, water, mineral deposit.
New perspectives ay natural resources include physical
resources as well e.g. imperial oil.
o5. Information Resources:
Specialized knowledge of employees that is useful to a
business and helps achieve its goals.
E.g. market forecasts, economic data.
Types of Economic Systems:
Different economic systems manage their factors of production
They are also different in which the way the decision are made about
production and allocation.
1.Command Economy:
Relies on centralized government to control all or most factors of
production and to make all or most production and allocation
Two types of this economy is
oCommunism: system in which the government owns and
operates all sources of production.
oSocialism: government owns and operates only selected
major industries. Small businesses are privately owned,
large portion of people work for the government.
Government enterprises are generally inefficient.
2.Market Economy:
Individuals control production and allocation decisions through
supply and demand.
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