Business: An organization that sells goods and services in an effort to make a profit.
Profit: Is what remains after a business’s expenses have been subtracted from its
income. (Profits reward the owners of businesses for taking the risks involved in
investing their time and money.)
-It encourages people to start and expand businesses.
-Profits from businesses that produce goods and services are paid to owners and
shareholders, taxes that businesses pay help support governments at all levels.
Not-for-profit-organizations: Do not try to make a profit. (Generates its money
from government grants or sales of goods and services)
-Provides services to he public. (ex; Charities, Educational institutions, Hospitals,
Labour unions, Government Agencies)
-Business principles are helpful as they try to achieve their service goals.
Economic System: Distributes a nation’s resources among its citizens.
-Vary in terms of who owns and controls these resources, known and “factors of
production”. : Sometimes ownership is private, sometimes owned by government or
sometimes both ex; Canada. (Command and Market Economy or Mixed Economy)
Factors of production: The basic resources that a countries businesses use to
produce goods and services. Natural resources (land), Labour (human resources),
Capital, Entrepreneurs, Sometimes Information Resources.
Labour: People who work for a company.
-Mental and physical capabilities of people.
-Ex; Imperial Oil: Requires a labour force with a variety of skills such as Managers,
Geologists, Truck Drivers.
Capital: Funds that are needed to start a business and keep it operating and
-Ex; Imperial Oil: Needs Capital to pay for its annual drilling cost.
-Major sources of capital for businesses: Personal investment owners, the sale of a
stock to investor, profits of the sale of products and services, Funds barrowed from
Entrepreneurs: People who except opportunities and risks of running and operating
-Ex; Mark Zuckerburg
Natural Resources: Includes all physical resources such as land, water, mineral
deposit, and trees.
-Ex; Imperial Oil uses wide variety of natural resources. Information Resources: Include the particular 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.
-Creation of new information or the repackaging of existing information for new
Economic systems: Sometimes ownership is private, sometimes owned by
government. (Command and Market Economy)
Command Economy: relies on centralized government to control all or most factors
of production and to make all or most production and allocation decisions.
-Communism: System in which government owns and operated all sources of
production. (Where they can or cannot work)
-Socialism: The government owns and operated only selected major industries.
Smaller businesses may be owed privately.
Declining is popularity.
Market Economy: Device for exchange between the buyers and sellers of a particular
good or service.(What they can or cannot manufacture)
Business to Consumer, Business to Business: B2B exceeds B2C in dollar value.
B2B and B2C don’t have much government involvement.
Both buyers and Sellers have freedom of choice.(But also have risk)
The Pure Market economy uses Input and Output Markets
-Input: firms buy resources from households, which then supply those recourses.
-Output: Firms supply goods and services in response to demand on the part of the
-Capitalism: The political basis for the free market economy, which allows private
ownership of the factors of production and encourages entrepreneurship by offering
profits as an incentive.
Mixed Economy: (command and market are complete opposites) Features
characteristics of both Command and Market economies.
-Privatization: Converting government enterprises into privately owed companies.
Ex; Air Canada was owned by government then sold to a private owner.
-Nationalism: Converting private owned firms into government owned firms Demand and supply of a market economy:
Market: exchange process between buyers and sellers
Demand: willingness and ability of buyers to purchase a product or service. (buys)
Supply: willingness and ability of producers to offer goods and services for sale
The law of demand: Buyers will buy more, as it gets cheaper.
The law of supply: Producers will offer more for sale as price rises.
*Businesses must seek the right combination of price charged and quantity supplied.
-Right combination is found at the equilibrium point.
Private Enterprise and Competition:
Private enterprise: One that allows individuals to peruse their own interests with
minimal government restriction. (Private Property rights, freedom of Choice, profits,
-Markets rely on private enterprise.
Competition: occurs when 2 or more businesses compete for the same resource or
-Forces businesses to make product better or cheaper.
^Degrees of competition:
Perfect Competition: For it to exist firms must be a small size (but in large numbers),
products of each firm are almost identical. Same products
Ex. Wheat sellers sell there product at same price and produce the same amount and
sell the same amount. (Really not competing with each other)
Monopolistic: Fewer sellers then in Pure, but still many buyers.