copyright © 2006 pearson education canada inc. 1-1 chapter 1 understanding the canadian business...

1-1

Copyright © 2006 Pearson Education Canada Inc.

Chapter 1Chapter 1

Understanding the Canadian Business System

1-2 Copyright © 2006 Pearson Education Canada Inc.

Define the nature of Canadian business and identify its main goals

Describe different types of global economic systems

Show how demand and supply affect resource distribution in Canada

Identify the elements of private enterprise and explain the various degrees of competition in the Canadian system

Trace the history of business in Canada

Learning Objectives


Business: an organization that produces or sells goods or services in order to make a profit

The Nature of Canadian Business


Profit The money left over from

revenues after a firm pays its expenses

Motivates individuals to

engage in business activities

The Nature of Canadian Business


Factors of Production-resources used by firms -resources used by firms to create goods & servicesto create goods & services

Natural Natural ResourcesResources

HumanHumanResourcesResources

CapitalCapital

EntrepreneursEntrepreneurs

Factors of Production


Command economies Communist Socialist

Market economiesMixed economies

Types of Economic Systems


The government owns the factors of production and makes all decisions regarding distribution of resources

Government owns

all industries,

including

essential services

The Communist Model


The government owns and operates all critical industries such as utilities & major institutions

Individuals own non-critical businesses

The Socialist Model


Market Economy

Distribution of resources is based on supply & demand Ownership of the factors of production is open to all who have the ability and the interestBuyers and sellers have freedom of choice

The market is the mechanism for the exchange of goods and services


Input and Output Markets

Input market Firms buy resources from

households

Output market Households buy goods and

services from firms


Circular Flow in a Market Economy

OUTPUT MARKETS•Goods and Services

HOUSEHOLDS:•Demand products in output markets

•Supply products in input markets

INPUT MARKETS:•Labour

•Capital

•Entrepreneurs

•Physical resources

•Information resources

FIRMS•Supply products in

output markets

•Demand resources in input markets


Mixed economy a system featuring characteristics of both

command and market economies

No country has a pure communist, socialist, or capitalist systemEastern European countries are adopting a mixed economy by privatizing many of their state run enterprises

The Mixed Economy


CompetitorCompetitor RegulatorRegulator

Taxation AgentTaxation AgentProvider ofProvider ofIncentivesIncentivesCustomerCustomer

Provider of Essential Provider of Essential ServicesServices

The Many Roles of Government


The government manages and The government manages and regulates business …regulates business … CanadianCanadian

Radio Radio --televisiontelevisionand and TelecommunicatiTelecommunicationsonsCommissionCommission (CRTC)(CRTC)

National Energy National Energy BoardBoard

Provincial BoardsProvincial Boards Hazardous Products ActHazardous Products Act

Competition PolicyCompetition Policy Food and Drug ActFood and Drug Act

Tobacco ActTobacco Act

Weights andWeights andMeasures Measures ActAct

Canada Water ActCanada Water Act

Fisheries ActFisheries Act

Environmental Contaminants ActEnvironmental Contaminants Act

Economic Administration and Regulation


Government As Tax AgentRevenue taxes designed to generate cash to fund various

services and programs e.g. income taxes Progressive revenue taxes are levied at a

higher rate on higher-income taxpayers than on lower-income taxpayers (income taxes)

Regressive revenue taxes are levies at the same rate regardless of a person’s income (sales taxes)

Restrictive taxes Levied to control certain activities: to lessen

the consumption of liquor & tobacco


Government provides aid and assistance to small businesses and non-profit organizationsIncentives stimulate growth in revenues and employment

jobjobss

LoansLoans

TrainingTraining

HelpHelp

Government Incentives


Government Provider of Essential Services

All three levels of government provide various services

Highways Postal service Money Armed forces Information Sewer & sanitation Emergency services Health services Education


Business

LobbyistsTrade

Associations Advertising

Government

Lobbyists must register to be in accordance Lobbyists must register to be in accordance with the Lobbyists Registration Actwith the Lobbyists Registration Act

How Business Influences Government


Supply and Demand Analysis for Pizzas

$2018 Demand Curve

1614 Equilibrium

Price 12 Price Supply Curve

10 and

8 Quantity

642

100 500 1000 1500 2000Quantity

Supply and Demand


Effects of a Shortage on Price

$2018 Supply Curve B

1614 Equilibrium Supply Curve A

Price 12 Price B

10 Equilibrium Price A

8 Demand Curve

642

100 500 1000 1500 2000Quantity

A shortageA shortagedrivesdrivespricespricesup.up.

Dealing with a Shortage


A surplusA surplusdrives drives prices prices downdown

Effects of a Surplus on Price

$2018 Demand Curve

1614 Equilibrium Supply Curve A

Price 12 Price A

10 Supply Curve B

86 Equilibrium

4 Price B

2100 500 1000 1500 2000

Quantity

Dealing With a Surplus


Private enterprise occurs in a market economyUnder this system individuals Can own property Have freedom of choice Have the freedom to earn profits Have freedom to compete

Government interference is minimal

Private Enterprise


Perfect competitionMonopolistic competitionOligopolyMonopoly

Degrees of Competition


Has many sellersThe product is basically identicalIndividual firms have no control over priceThe buyer will purchase from the lowest price source

Perfect Competition


Has few to many sellers

The product is seen as unique by some buyers, but not necessarily all

A differentiated brand provides the firm with some limited control over pricing

Monopolistic Competition


Oligopoly

A few large sellers dominate the marketHigh barriers to entryProduct differentiation is used to attract customers Each supplier knows what the others are chargingCompetition can be fierce


Monopoly

One producer Electric utility

Unique product

The producer has complete control over price because there are no competitors


Natural Monopoly

A market or industry in which having only one producer can efficiently meet demandIt is the most efficient approach – duplicate facilities would be wasteful Electric power utility


Brief History of Business in Canada

The early years

The factory system and the

industrial revolution

The entrepreneurial era

The production era


Brief History of Business in Canada

The sales and marketing eras

The finance era

The global era


Business activity and profit from commercial fishing were the motivation for the first European settlers Mercantilism: colonists were expected to export raw materials like beaver pelts and lumber at low prices to the mother country (notably England and France)

The Early Years


Industrial Revolution: A major change in goods production characterized by a shift to the factory system, mass production, and specialization of labour Factory system: a process in which all the machinery, materials, and workers required to produce a good in large quantities are brought together in one place

The Industrial Revolution


Adam Smith argued in his book “The Wealth of Nations” that the “invisible hand” would guide the economy to produce high quality products for the lowest possible prices Government involvement should be discouraged and businesses should function without regulation or restriction

The Entrepreneurial Era


Concepts of specialization and mass production were more fully refinedBusiness focused on improving productivity and manufacturing methodsIntroduction of the moving assembly line

The Production Era


Sales era: business focused on sales forces, advertising, and keeping products readily availableMarketing era: business began to identify and meet consumers wants in order to make a profit

The Sales and Marketing Eras


Period when emphasis shifted to mergers and the buying and selling of business enterprises Also known as the “decade of greed”

The Finance Era


Technological advances in production, computer technology, information systems, and communication capabilitiesEmergence of global economyRapid increase in internet usage facilitates global business activity

The Global Era

copyright © 2006 pearson education canada inc. 1-1 chapter 1 understanding the canadian business...

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