Copyright © 2009 Pearson Education Canada 1-1

Chapter 1Chapter 1Understanding Understanding

thethe

Fundamentals Fundamentals of Business of Business

and and EconomicsEconomics

Copyright © 2009 Pearson Education Canada 1-2

Why Study Business?Why Study Business?

• Learn what it takes to run a businessLearn what it takes to run a business

• Build business vocabularyBuild business vocabulary

• Develop workplace skillsDevelop workplace skills

• Learn about a variety of jobsLearn about a variety of jobs

• Appreciate today’s business careerAppreciate today’s business career

Copyright © 2009 Pearson Education Canada 1-3

What Is a Business?What Is a Business?

For-ProfitFor-Profit Non-ProfitNon-Profit

Money MotiveMoney Motive Social ServiceSocial Service

Ethical ConductEthical Conduct

Social ResponsibilitySocial Responsibility

EfficiencyEfficiency EffectivenessEffectiveness

Copyright © 2009 Pearson Education Canada 1-4

Business CategoriesBusiness Categories

Providing ServicesProviding ServicesProducing GoodsProducing Goods

Capital intensive Labour intensive

Copyright © 2009 Pearson Education Canada 1-5

Growth in the Service SectorGrowth in the Service Sector

Copyright © 2009 Pearson Education Canada 1-6

Why Is the Why Is the Service Sector Service Sector

Growing?Growing?• More disposable income

• Changing demographics and lifestyles

• Complex goods and new technologies

• Need for professional advice

• Low barriers to entry

Copyright © 2009 Pearson Education Canada 1-7

What Is an Economic What Is an Economic System?System?

Goods Services

HumanResources

NaturalResources

Capital KnowledgeEntrepreneurs

Factors of Production

ScarceResources

Copyright © 2009 Pearson Education Canada 1-8

The New EconomyThe New Economy

GeneralCharacteristics

•Physical assets•Cost control

•Intellectual assets•Adding value

Technology •Mechanical •Information

Workforce •Job-specific skills•Transferable skills•Lifelong learning

Geography •Close to resources•Near to collaborators •Near to competitors

Capital •Debt financing •Venture capital

New EconomyOld Economy

Copyright © 2009 Pearson Education Canada 1-9

Types of Economic Types of Economic SystemsSystems

CapitalismMixed

CapitalismSocialism Communism

Privatization

Free-MarketSystem

PlannedSystem

Copyright © 2009 Pearson Education Canada 1-10

How Does a Free-Market How Does a Free-Market Economic System Work?Economic System Work?

GovernmentGovernmentInterventionInterventionGovernmentGovernmentInterventionIntervention

Supply Supply and Demandand Demand

Supply Supply and Demandand Demand

CompetitionCompetitionCompetitionCompetition

Copyright © 2009 Pearson Education Canada 1-11

Supply and Demand RelationshipSupply and Demand Relationship

10 15 20 25 30

Quantity of Hats

Pri

ce$35

$30

$25

$20

$15

Not enough demandD

Right pricemakes supply & demand equal

E

Not enough supply

S

Copyright © 2009 Pearson Education Canada 1-12

Copyright © 2009 Pearson Education Canada 1-13

PurePurecompetitioncompetition

MonopolisticMonopolisticcompetitioncompetitionOligopolyOligopoly

MonopolyMonopoly

Free-Market CompetitionFree-Market Competition

Copyright © 2009 Pearson Education Canada 1-14

Competitive Competitive AdvantageAdvantage

• Price

• Speed

• Quality

• Service

• Innovation

Copyright © 2009 Pearson Education Canada 1-15

The Role of The Role of GovernmentGovernment

• Fosters competitionFosters competition

• Regulates industriesRegulates industries

• Deregulates industriesDeregulates industries

• Protects stakeholder’s rightsProtects stakeholder’s rights

• Contributes to economic stabilityContributes to economic stability

Copyright © 2009 Pearson Education Canada 1-16

Fostering CompetitionFostering Competition

Competition Act

Mergers andacquisitions

Copyright © 2009 Pearson Education Canada 1-17

Regulating and Regulating and Deregulating IndustriesDeregulating Industries

GovernmentGovernmentRegulationRegulation

FreeFreeCompetitionCompetition

Fair CompetitionFair CompetitionFair CompetitionFair Competition

Business EthicsBusiness EthicsBusiness EthicsBusiness Ethics

Working ConditionsWorking ConditionsWorking ConditionsWorking Conditions

Public SafetyPublic SafetyPublic SafetyPublic Safety

Copyright © 2009 Pearson Education Canada 1-18

Protecting Protecting StakeholdersStakeholders

•Competition BureauCompetition Bureau

•Health CanadaHealth Canada

•Transport CanadaTransport Canada

•National Energy BoardNational Energy Board

•Canadian Food Inspection Agency (CFIA)Canadian Food Inspection Agency (CFIA)

•Canadian Radio-Television and CommunicationsCanadian Radio-Television and Communications Commission (CRTC)Commission (CRTC)

•Competition BureauCompetition Bureau

•Health CanadaHealth Canada

•Transport CanadaTransport Canada

•National Energy BoardNational Energy Board

•Canadian Food Inspection Agency (CFIA)Canadian Food Inspection Agency (CFIA)

•Canadian Radio-Television and CommunicationsCanadian Radio-Television and Communications Commission (CRTC)Commission (CRTC)

ColleaguesColleagues EmployeesEmployees SupervisorsSupervisors

EnvironmentEnvironment CustomersCustomers SuppliersSuppliers

SocietySociety

Inve

stor

sIn

vest

ors

Copyright © 2009 Pearson Education Canada 1-19

Contributing to Contributing to Economic StabilityEconomic Stability

EconomicEconomicExpansionExpansion

EconomicEconomicContractionContraction

RecoveryRecovery

RecessionRecession

BusinessBusinessCycleCycle

BusinessBusinessCycleCycle

MonetaryMonetaryPolicyPolicy

FiscalFiscalPolicyPolicy

InterestInterestRatesRates

Revenue andRevenue andSpendingSpending

Copyright © 2009 Pearson Education Canada 1-20

Monitoring Major Monitoring Major

Economic IndicatorsEconomic Indicators

Interest ratesInterest ratesInterest ratesInterest rates

UnemploymentUnemploymentstatisticsstatistics

UnemploymentUnemploymentstatisticsstatistics

Housing startsHousing startsHousing startsHousing starts

Durable-goodsDurable-goodsordersorders

Durable-goodsDurable-goodsordersorders

Copyright © 2009 Pearson Education Canada 1-21

Measuring Price ChangesMeasuring Price Changes

InflationInflation DeflationDeflation

Consumer Price Consumer Price Index (CPI)Index (CPI)

Purchasing PowerPurchasing Power

Copyright © 2009 Pearson Education Canada 1-22

Measuring National Measuring National OutputOutput

Gross NationalGross NationalProduct (GNP)Product (GNP)

Gross DomesticGross DomesticProduct (GDP)Product (GDP)Dollar ValueDollar Value

YesYesYesYesFinal goods Final goods and servicesand services

YesYesYesYesDomestic businessesDomestic businesses

NoNoYesYesForeign-owned Foreign-owned businessesbusinesses

YesYesNoNoOverseas operationsOverseas operations

Copyright © 2009 Pearson Education Canada 1-23

Copyright © 2009 Pearson Education Canada 1-24

Monetary and Fiscal Monetary and Fiscal PolicyPolicy

• Monetary Policy– Actions taken by the Bank of Canada to regulate

the nation’s money supply• adjusting interest rates• conducting open market operations

• Fiscal Policy– Use of government revenue and spending to

influence the business cycle• adjusting tax rates• changing government spending patterns

Copyright © 2009 Pearson Education Canada 1-25

Copyright © 2009 Pearson Education Canada 1-26

Challenges of Challenges of GlobalizationGlobalization

• Products and servicesProducts and services

• Managing a small businessManaging a small business

• Globalization and workforce diversityGlobalization and workforce diversity

• Ethics and social responsibilityEthics and social responsibility

• Technology and electronic commerceTechnology and electronic commerce