Business Management: Chapt 1
Business- An organization that produces or sells goods or services in an effort to make
Proﬁt- What remains after a business"s expenses have been subtracted from its
Revenues- the money a business earns selling its products and services; sales.
Expenses- The money a business spends producing its goods and services and !
!generally running the business; costs.
Economic system- The way in which a nation allocates its resources among its citizens.
! ! -Differ in terms of who owns/controls these resources known as #factors of
! ! production"
Factors of Production- Basics resources that a country"s businesses use to produce
goods and services.
Labour- Human resources, mental/physical capabilities of people.
!-Knowledgeable employees create real competitive advantage for a company.
Capital- The ﬁnancial resources needed to operate an enterprise.
!-Needed throughout operation ( starting a business to expanding it)
Entrepreneurs- Individuals who organizes and manages labour, capital, and natural
!resources to produce goods and services to earn a proﬁt but who also takes risk
Natural Resources- Items used in production of goods and services in their natural
!state, including land, water, mineral deposits and trees.
Information Resources- e.g market forecasts, economic data, and specialized
!knowledge of employees that is useful to a business and that helps it achieve its
! ! -Very common in todays business worlds
Command Economy- Relies on the centralized government to control all or most factors
!of production and to make all or most production and allocation decisions.
Market Economy- Individuals- producers and consumers- control production and
!allocation decisions through supply and demand.
Communism- A system in which the government owns and operates all sources of
! ! production.
-Karl Marx, German economist envisioned a society in which individuals would
ultimately contribute according to their abilities and receive economic beneﬁts according
to their needs. He had expected government ownership to be temporary. When the
economy is stable, he expects the gov. to whither away.
-Currently, most countries abandoned communism in favour of a more market-based
Socialism- The government owns and operates only selected major industries while
!individuals operate/own less crucial industries.
Market- A mechanism for exchange between the buyers and sellers of a particular good