Canadian Business System Chapter 3

Nature of Canadian Business

• Businesses aim to generate profit through providing goods and services.
• Profit is residual income after deducting expenses from revenue, incentivizing investment and risk-taking.
• Not-for-profit organizations deliver services without profit motives, depending on grants or service revenues.
• Examples of not-for-profit entities include charities, educational institutions, hospitals, and labor unions.

Economic Systems

• Economic systems regulate resource allocation based on ownership and control of production factors.
• Factors of Production include labor, capital, entrepreneurs, natural resources, and information.
• Labor represents the workforce, while capital encompasses funds needed for business operations.
• Entrepreneurs manage opportunities and risks in business creation.
• Natural resources include physical elements essential for production; information represents specialized knowledge relevant in business contexts.

Types of Economic Systems

• Command economies involve government control over production factors and decision-making.
• Market economies are characterized by individual control over production factors and decisions.
• Communism is a command economy where the government owns all production resources, while socialism allows for some private ownership.
• Capitalism relies on market mechanisms to determine what, when, and for whom to produce.
• Mixed market economies combine elements of both command and market systems, prevalent in most nations.
• Privatization refers to transferring government activities to the private sector.
• Deregulation involves reducing governmental regulations impacting business activities.

Government and Business Interaction

• Government acts as a customer, purchasing diverse products and services from businesses.
• Crown corporations represent government competition with private businesses.
• Regulatory bodies oversee business activities, focused on protecting competition, consumers, and the environment.
• Taxes collected by various government levels primarily fund public services and programs.
• Governments provide incentives and financial assistance to promote economic development.
• Essential services from government, such as infrastructure and statistical data, support business operations.
• Businesses influence government through lobbyists and trade associations advocating for industry interests.

Demand and Supply in Resource Distribution

• Market described as an exchange process involving buyers and sellers.
• Demand indicates consumer willingness to purchase, while supply reflects producer willingness to sell.
• The Law of Demand states that lower prices increase quantity demanded; the Law of Supply states that higher prices increase quantity supplied.
• Market price or equilibrium occurs where quantity demanded equals quantity supplied.
• A surplus happens when the supply exceeds demand.

Elements of Private Enterprise and Competition

• Private enterprise is defined by ownership rights, individual choice, profit pursuit, and competitive environments.
• Ownership involves individuals controlling resources to create wealth.
• Freedom of choice allows individuals to select employment and purchase decisions freely, influencing market dynamics.
• Profit incentive drives entrepreneurial ventures and impacts production choices.
• Competition motivates businesses to enhance efficiency and product quality.

Degrees of Competition

• Economists classify competition types based on market characteristics:
  • Perfect competition involves many small firms producing identical products with no price control.
  • Conditions for perfect competition include numerous small firms, identical products, market price transparency, and ease of market entry/exit.