After completing Lesson 1, you should be able to: 1. What is a business? A profit seeking activity that provides goods and services that satisfy customer needs. 2. Identify four key social and economic roles that businesses serve 1. Provide Society with necessities 2. Provide people with jobs and a means to prosper 3. Pay taxes that are used by government to provide services for its citizens 4. Reinvest their profits in the economy; increasing a nations wealth 3. Differentiate between goods-producing and service businesses. Goods- Producing Business: Produce tangible goods Capital intensive – require large startup fund for equipment, space etc. Manufacturing, construction, mining, agriculture Service Business: Produce intangible goods Labor intensive – rely heavily on human resources Repair, health care, finance, insurance 4. List five factors that explain the rise in the number of service businesses 1. Consumers has more disposable income (baby boomer population) 2. Services target changing demographic patterns and lifestyle changes (home maintenance, child care, food service – due to an increase in: single parents, working households etc.) 3. Services are needed to support complex good and new technology (electronics require install and support) 4. Companies are increasingly seeking professional advice (consulting, business coach etc) 5. Barriers to entry are low for service businesses
5. Differentiate between a free-market system and a planned system Free Market System: Allows individuals to decide what products to produce, who to sell to, and what to sell for Production of goods that society wants, in quantities that society wants, without regulation of any kind. Mixed System: What Canada falls under, influencing allocations through tax incentives, restricting particular sales or setting price controls (min and max) Planned System: Government controls the allocation of resources, limit choices to individuals to attain government goals. Social equality is goal. 6. Explain how supply and demand affect price Price is affected by the supply the seller has access to, and at what cost that supply is at. If the seller can attain their product for a lower rate, they can afford to sell that product at a lower rate. The perfect number (equilibrium) is when the seller can attain the product for lower than what the consumer is willing to pay for it. Demand effects pricing in the way that companies will lower a price on an item that has no shelf value, whereas another item that moves like hot cakes will be priced higher as the demand for them is bigger. 7. Explain the four major economic roles of the Canadian Government 1. It enacts laws and creates regulations to foster competition: Sets out laws to abolish illegal trading Sets regulations to ensure companies cannot have monopoly on market, which gives them control of pricing, as well as prevents other businesses from entering that market.
2. It regulates and deregulates certain industries Safe working conditions, ethical business practices etc. Banking industry is prime example of regulated market 3. It protects stakeholders rights To avoid fake financial statement, money being invested only in profit producing areas and not safety and regulating areas. 4. It intervenes to contribute to economic stability Adjust taxes, adjust interest rates, regulate circulation of money in economy. Monetary Policy: Adjusting interest rates to help control inflation Fiscal Policy: Changes in the governments spending and revenue tactics, as it highly affects the economy. 8. Explain how a free-market system monitors its economic performance Unemployment