BMGT 100 Paper

These learning objectives are based upon those at the beginning of the chapter. For a review of learning objectives, see the summary at the end of the chapter, as well as the list of key terms.

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Learning Objective: 1-1

Page: 6

Notes

The text focuses on businesses only, since they generate profits. However, this discussion can be expanded to include other organizations that are active in our society which are not profit-based:

- charitable organizations

- government enterprises

The difference is that the profit motive is not present, so volunteerism is an important part of the organization’s composition.

Activity

Have students research a corporation in the library using the corporate reports. Have the students work in groups to identify the products/services sold, and the profitability of the firm in return for risking its assets to produce the goods.

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Learning Objective: 1-2

Page(s): 6-7

Notes

The Factors of Production are basic resources which are the building blocks of an economic system, include:

natural resources: minerals, lumber, water, land

labour: human production, expertise

capital: money needed to run a business which comes from investment, borrowing or sales

entrepreneurs: the people who organize and manage the factors of production in a business environment in order to produce a profit, risking failure and loss

information: (now often included) – specialized knowledge, economic data

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Learning Objective: 1-2

Page(s): 8-10

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Learning Objective: 1-2

Page(s): 8

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Learning Objective: 1-2

Page(s): 8

Notes

In a market economy:

Demand is willingness of consumers to buy a product or service

Supply is the willingness and ability of producers to sell the product or service

The issue of supply and demand is further discussed in additional slides for this chapter, and in the discussion of supply, demand, and price determination in the text.

The issue of choice, ability and interest are all freedoms which students identify with. They tend to approach this from a very strong cultural bias. Through discussion construct a table on the board illustrating the strengths of living in a planned, vs. a market, economy. Force them to list strengths and weaknesses of both systems.

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Learning Objective: 1-2

Page(s): 9

Figure 1.1

Activities

Have students list the types of products that apply to input and output markets.

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Learning Objective: 1-2

Page(s): 7-8

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Learning Objective: 1-2

Page(s): 9-10

Notes

• China is encouraging entrepreneurial activity
• Russia has returned to a non-communist regime
• In Canada, many “necessities” or “essential services” are supplied by the state

Activities

Have students analyze the Canadian government system. This is a mixed economy. Let them indicate which aspects of the economic system are controlled by government.

Expand on the first activity by having students compare Canada’s level of government regulation with that of the United States. Then, let them describe which system is more socialistic, capitalistic, etc.

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Learning Objective: 1-3

Page(s): 10-13

Notes

Government Competes: the government often sells the same products or services which private business does. Crown corporations are an example Economic Administration: the government uses various administrative methods to rule as required, including: boards, tribunals, commissions. Other regulatory agencies include organizations such as the CRTC.

Government Regulation: the government regulates many industries (transportation, banking, etc.) although the emphasis today is towards deregulation. Key areas of regulation include protecting competition, consumer protection, meeting social/safety goals, and the environment.

Taxation: the government collects tax revenue from various sources (income, restricted products (tobacco, alcohol).

Providing Incentives: government provides funding and other specialized programs to encourage business development, employment and other agenda items (e.g.: Industrial and Regional Development Program).

Providing of Services to Businesses: government assists business through trade commissions worldwide, Stats Canada reports, maps, export development.

Buying from Business: the government is a leading customer of an infinite array of goods and services purchased from the private sector.

Providing Essential Services: the government maintains the infrastructure required to maintain the market system including highways, buildings, school, hospitals, and other essential services.

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Learning Objective: 1-3

Page(s): 10-11

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Learning Objective: 1-3

Page(s): 12

Notes

Income tax is the primary tax in effect in Canada. A tax is progressive if those with higher incomes pay a higher percent of their income on taxes. Generally, income taxes are designed to be a progressive tax.

A tax is regressive if those with lower incomes pay a higher percent of their income in taxes. Sales taxes have the effect of a regressive tax. This occurs because those with lower incomes spend a higher percent of their incomes in stores than do their richer counterparts. This means that they pay a higher percent of their income in sales taxes than do those with more money.

Activity

Statistics Canada produces a wealth of census data which reflect the spending patterns of Canadian. Have students investigate the Stats Can tables to demonstrate statistically:

1) the progressive nature of the income tax system

2) the regressive nature of sales taxes

Have students then use the tables to argue whether or not liquor and tobacco taxes are regressive or progressive in nature.

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Learning Objective: 1-3

Page(s): 12

Notes

Government assists business and influences its growth by offering various assistance programs or “incentives.” Such incentive may include offering financial help, training and/or information to assist a firm to export Canadian goods. These programs are often geared to specific low growth regions across the country.

Examples:

Export Development Corporation

Energy, Mines and Resources Canada

Industrial Regional Development Program

Industrial Assistance Programs

Atlantic Canada Opportunities Agency (ACOA)

Activities

Proponents of assistance programs argue that it brings hope of prosperity to under developed economic regions. Opponents of such programs insist that it creates a “grant mentality” that if you can get the money you can do it. That many businesses spawned with such programs are weak and non-competitive and unable to make it on their own. Let students debate this issue.

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Learning Objective: 1-3

Page(s): 12

Activities

Some people believe that some essential services should be privatized. The argument is that privatizing such services would increase service levels and decrease costs, thereby making them more efficient. The government has been moving to streamline such services as health care and education, but they have stopped short of actually privatizing them. Have students discuss the pros and cons of privatizing the services listed on the slide and in the text.

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Learning Objective: 1-4

Page(s): 13-14

Figure 1.3

Notes

• Law of Demand: Consumers want to buy items at lower prices.
• Law of Supply: Sellers want to sell prices at higher prices.
• Equilibrium Price: Occurs when buyers are willing to purchase goods and services, of acceptable value and quality, for a price that sellers are willing to meet which allows profitability (where demand and supply curves cross).
• Market research reveals how consumers feel about products and prices.
• A Demand and Supply Schedule maps relationships between sellers and buyers by indicating how many units buyers will buy at various prices charged by suppliers.
• Demand curves show how many units will be purchased at different price levels.
• Supply curves show how many units will be produced for sale at different supply levels.
• Due to the Law of Demand, the Demand curve shows more units are purchased at lower price levels.
• This means the Demand Curve slopes downward to the right (as prices go up the amount purchased decreases).
• Due to the Law of Supply, the Supply curve shows more units are produced for sale at higher price levels.
• This means that the Supply Curve slopes upward to the right (as prices go up the amount produced increases).
• Where the Supply and Demand Curves meet shows the “equilibrium price.”
• The equilibrium price is the price at which buyers will purchase and suppliers will produce the product.
• The market price emerges naturally as part of the exchange process in a market economy.

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Learning Objective: 1-4

Page(s): 14

Notes

Shortage: a lack of supply

Limited supply will shift the Supply Curve sideways to the left.

This will create a new equilibrium price crossing the Demand Curve at a higher price point than normal.

This shows that shortages drive prices up.

Individual suppliers will lose potential revenue from selling more units even at lower prices.

The lack of supply can anger consumers and destroy their confidence in the market and its suppliers.

Suppliers attempt to produce the number demanded to avoid shortages or surpluses which are ultimately damaging and reduce profits.

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Copyright © 2017 Pearson Canada Inc.

Supply and Demand
(LO 1-3)

A surplus drives prices down

Dealing with a Surplus