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ADMS 1000 (298)
Chapter 2

ADMS 1000 Chapter 2 Notes

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Department
Administrative Studies
Course
ADMS 1000
Professor
Peter Khaiter
Semester
Fall

Description
Chapter2: Notes and terms The idea 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 business’s expenses have been subtracted from their revenue  The prospect of earning profits is what encourages people to start and expand business Not for profit organizations: do not try to earn profit; use the funds they generate to provide services to the public Economic systems around the world Economic system: allocates a nations resources among its citizens  Economic systems differ in terms of who owns and controls theses resources, know as the factor of production Factors of production  Key difference between economic system is the way in which they manage the factors of production Factors of production: the basic resources that a country’s businesses use to produce goods and services Labour: the people who work for a company represent labour  Labour is the mental and physical capabilities of people Capital: the funds that are needed to start a business and to keep it operating and growing  Major sources for businesses are personal investments by owners, the sale of stock to investors, profits from the sale of products/services, and funds borrowed from banks Entrepreneurship: people who accept the opportunities and risks by creating and operating a business Natural resources: All physical resources such as land, water mineral deposits and trees Information Resources: include the specialized knowledge and expertise of people who work in businesses as well as information that is found in market forecasts and various other forms of economic data Types of Economic systems Command economy  Command/Centrally-planned Economies Two most basic forms are;  Communism: Government controls the factors of production  Socialism: government owns and operates only selected major industries o Smaller businesses may be privately owned o Socialism is declining in population o Management filled based on political considerations rather than ability, so government-operated business are inefficient Market Economy Market: a mechanism for exchange between the buyers and sellers of a particular good or service Capitalism: Privately-controlled factors of production, encourages entrepreneurship by offering profits as an insensitive Involves internet which brings buyers and sellers together through ecommerce B2B (business to business) – businesses joining together to create e-commerce companies that make them more efficient when they purchase the goods and services they need B2C(business to consumers) – buying over the internet for personal uses  In market economy B2B and B2C exchanges take place without much gvnt involvement  Buyers and sellers have choices Mixed Market Economy  Command and market economies are opposite  Mixed market features characteristics of both command and market economies Privatization: (began in 1990’s) it is the converting of government enterprises into privately owned companies Nationalization: converting private firms into government owned firms  Governments in mixed market economies intervened in the economic system in attempt to stabilize it, but this has led to higher deficits and more control of business activity Input and output markets Input market: firms buy resources from households which then supply those resources Output market: firms supply goods and services in response to demand on the part of the household Demand and supply in a market economy Demand: is the wiliness and ability of buyers to purchase a product or service Supply: is the willingness and ability of producers to off a good or service for sale The law of demand: buyers will purchase more of a product if the price drops The law of supply: sellers will offer more for sale if the price rises Private Enterprise and Competition  Market economies reply on private enterprise system Private enterprise: on that allows individuals to pursue their own interest with minimal government restriction; requires; Private property: ownership used to create wealth is in individuals hand Freedom of choice: both buyers and seller chose what to buy and what to sell Profits: lead people to become bear the risks of entrepreneurship Competition: occurs when two or more businesses vie for the same resources of customers  Competition motivates to operate efficiently  Competition forces all businesses to make products better and cheaper Degrees of Competition Perfect Competition  Undifferentiated products  Infinite buyers and sellers  Perfect information
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