Chapter 1 Flashcards
What is the nature of Canadian business and identify its main goals
- operates within in a mixed market economy (command and market economy)
- primary goal is to earn profits by providing good and services
- for profit focus on maximizing profits
- not for profit aim to provide services rather than profit
- businesses engage in innovation, resource management, and expansion to meet customer demand and contribute to national economy
what are the different types of global economic systems, according to the means by which they control the factors of production through input and output markets
- command economy: the government controls most or all factors of production and makes all major production decisions (eg. communism which is where the government owns and operates all industries)
- market economy: individuals control most factors of production and make production decisions based on market demand and supply. Input markets allow firms to buy resources and output markets allow firms to supply goods and services to consumers
- mixed market economy: combination of command and market economy. both private and government owned businesses coexist. most nations use this economy allowing private ownership while government regulates certain industries
describe the interactions between business and government in Canada
- government as a customer: government purchases goods and services like buildings, office supplies etc
- government as a competitor: crown corporations operate in sectors like energy and transportation, competing with private businesses
- government as a regulator: government regulates businesses through laws and regulations to promote competition, protect consumers and achieve social goals
- government as a taxation agent: businesses and individuals are subject to taxes
- lobbying and influence: businesses can influence government policies through lobbyists, trade associations and advertising
how does demand and supply affect resource distribution in Canada
- the laws of demand and supply determine how resources are distributed
- when demand increases producers are incentivized to allocate more resources toward its production to meet consumer needs
- when demand decreases resources are shifted away from that product to prevent losses
- availability and cost of resources like labor and capital are influenced by both market conditions and government polices that regulate the economy
what are the elements of private enterprise
- private ownership: individuals are businesses can own property and resources
- profit motive: businesses operate with the goal of earning a profit
- competition: businesses are encouraged to be competitive so that they offer better products, services or prices to attract consumers
- freedom of choice: consumers and businesses in canada have the freedom to make decisions regarding what to buy, sell, and produce
what are the various degrees of competition in the Canadian economic system
- perfect competition: occurs when there are many small firms selling identical products. no single firm has control over the market price. firms compete mainly on price and there are no barriers to entry or exit. (eg. grain farming, dairy farming etc.)
- monopolistic competition: firms sell similar but not identical products. each company tries to differentiate its offering through advertising, branding or product features, which allows some level of pricing power. low barriers to entry and exit. (eg. retail clothing industry, fast food restaurants, etc.)
- Oligoploy: small number of large firms dominate the market. competition exists but these firms have major control over prices and market share. barriers to entry and exit are high. (eg. airlines, telecommunications, etc)
- monopoly: one firm controls the entire market for a product or service, setting prices without competition. barriers to entry and exit are very high. In Canada they are heavily regulated or controlled by the government to prevent abuse and protect consumer interests (eg. grocery stores, hotels, etc)
what is a business
an organization that seeks to earn profits by providing goods and services
what is profit
what remains after a business’s expenses are subtracted from its sales revenue
what is not-for-profit
an organization that provides goods and services to customers but does not seek to make a profit
* Ex. Charities, educational institutions, hospitals, etc.
what is an economic system
the way in which a nation allocates its resources among its citizens
what are factors of production
resources used to produce goods and services; labour, capital, entrepreneurs and natural resources
command economy
an economic system in which the government controls all or most factors of production and makes all or most production decisions
market economy
an economic system in which individuals controls all or most factors of production and make all or most production decisions
communism
type of command economy in which the government owns and operates all industries
socialism
government owns and operates only selected major industries
