Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada CHAPTER 1 Understanding the Canadian Business

Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright © 2008 Pearson Education Canada

CHAPTER 1CHAPTER 1

Understanding the Canadian Business

System

1-2


Define the nature of Canadian business and identify its main goals

Describe different types of global economic systems, according to the means by which they control the factors of production through input & output markets

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

1-3


Businesses produce or sell

products in order to make a profit

Profit the money left over from revenues after a firm

pays its expenses

motivates individuals to engage in business

activities

The Concept of Business and Profit

1-4


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

InformationInformationResourcesResources

Labour Labour (Human(HumanResources)Resources)

CapitalCapital EntrepreneursEntrepreneurs

Factors of Production

Natural Natural ResourcResourceses

1-5


Command economiesCommunist

Socialist

Market economies

Mixed economies

Types of Economic Systems

1-6


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

Government owns

all industries,

including essential

services

The Communist Model

1-7


The government owns

and operates all critical

industries such as

utilities & major

institutions

Individuals own non-critical businesses

The Socialist Model

1-8


Market Economy

Economic basis is supply & demand

Political basis is capitalism

Ownership of the factors of production is open to all

Buyers and sellers have freedom of choice

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

1-9


Input and Output Markets

Input market firms buy resources from households

Output markethouseholds buy goods and services

from firms

1-10


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

1-11


Mixed economy a combination of both freedom & government intervention

No country has a pure communist, socialist, or

capitalist system

Eastern Europe moving to a mixed economy by

privatization - converting many of their state run

enterprises into private companies

Deregulation – reducing laws and government

intervention affecting business activity

The Mixed Economy

1-12


CompetitCompetitoror

RegulatorRegulator

Taxation AgentTaxation Agent

Provider of Provider of IncentivesIncentives

CustomerCustomer

Provider of Essential Provider of Essential ServicesServices

The Many Roles of Government

1-13


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

CanadianCanadianRadio Radio ––television television and and TelecommunicationTelecommunicationssCommission (CRTC)Commission (CRTC)

Canadian Transport CommissionCanadian Transport Commission

Canadian Wheat BoardCanadian Wheat Board

Provincial BoardsProvincial Boards

Hazardous Products ActHazardous Products Act

Competition ActCompetition Act

Food and Drug ActFood and Drug Act

Tobacco ActTobacco Act Weights Weights andandMeasures Measures ActAct

Textile Labelling ActCanada Water ActCanada Water Act

Fisheries ActFisheries ActEnvironmental Contaminants ActEnvironmental Contaminants Act

Economic Administration and Regulation

1-14


Government as Tax Agent

Revenue taxes designed to generate cash,

including income taxes

Income tax is paid by individuals and businesses and represents

monies received during a single year

Restrictive taxes designed to lessen the consumption of “unhealthy”

products, including liquor & tobacco

They also raise revenue through import duties and gasoline taxes

1-15


Government provides aid and assistance to small businesses and non-profit organizations

Incentives stimulate growth in revenues and employment

LoansLoansTrainingTraining

HelpHelp

Government Incentives

1-16


Government Provider of Essential Services

All three levels of government provide various services Highways

Postal service

Money

Military

Information

Sewer & sanitation

Emergency services

Health services

Education

1-17


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

1-18


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

1-19


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

1-20


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

1-21


Private enterprise occurs in a market economy

Under 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

1-22


When businesses vie for the same resources or

customers in a particular market or industry.

Motivates business to operate efficiently

Forces business to make products better or cheaper

Competition

1-23


Perfect Competition

Monopolistic Competition

Oligopoly

Monopoly

Degrees of Competition

1-24


Has many sellers

The product is basically identical

Relatively easy to enter the industry

Individual firms have no control

over price

The buyer will purchase from the lowest price source

Perfect Competition

1-25


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 control over pricing

Monopolistic Competition

1-26


Oligopoly

A few large suppliers dominate the market

High barriers to entry

The products are seen as similar; no supplier has an edge

Each supplier knows what the others are charging

Prices gravitate towards a common “market price”

1-27


Monopoly

one producer and source of supply

unique product complete control

over price

no competitors

1-28


Natural Monopoly

A market or industry in which having only one producer can sufficiently meet demand

It is the most efficient approachElectric power utility

1-29


Brief History of Business in Canada

The Early Years

The Factory System and the Industrial

Revolution

The Entrepreneurial Era

The Production Era

1-30


Brief History of Business in Canada

The Sales and Marketing Eras

The Finance Era

The Global Era

The Internet Era

Documents

Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada CHAPTER 1 Understanding the Canadian Business