McMaster University

Centre for Continuing Education

BUS 825 Business Foundations
Spring 2020
Jeffrey O’Leary
Chapter 1

1
Today`s Agenda
• Introductions – Me & YOU
• Review Course Outline
• Chapter 1 – The Idea of Business and Profit

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A Little About Me…
 From the East Coast…
 Worked @ Maple Leaf Foods
 Marketing Performance & Planning
 Financial Analysis, Marketing, Strat & Research
 Controller at Karl Storz
 Teaching: Marketing/Accounting/Strategy
 University of Guelph (MCS/MBA/MA) – 12 Yrs.
 Brock University (BBA) – 15 Yrs.
 McMaster – 10 Yrs.
 Baseball & Travelling
 Chartered Marketer & CPA
 Harvard Business School
 Lead Instructor/Developer @ Canadian Marketing Association
 Speaker with HRPA, CM & CPA
 Not for Profit Board Member x 2
 Married to Kate & Dad to Audrey & Olivia

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The Idea of Business and Profit
• Businesses produce or sell
products in order to make
a profit

Profit

Revenues
• Non-profit Organizations
o provide goods and services but
Expenses do not seek profit
 schools, hospitals

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 Economic Systems Around the World
Human Resources
(Labour)
Capital Entrepreneurs

The Factors of
Production Information
Natural Resources Resources used by firms to create Resources
goods and services

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Economic Systems Around the World

Market Economies Command Economies

Capitalism Mixed Economy Socialism Communism

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Economic Systems Around the World
Command Economies
• Communism
o government owns and operates all
industries
o it makes resource distribution
decisions

• Socialism
o government owns and operates
critical industries (utilities and
major institutions)
o Individuals own non-critical
businesses

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Economic Systems Around the World
Market Economies
• Economic basis is supply and
demand
• Political basis is capitalism
• Ownership of the factors of
production is open
• Buyers and sellers have freedom of
choice
• The market is the mechanism for
the exchange of goods and services
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Economic Systems Around the World
• Input market
o firms buy
resources from
households

• Output market
o households
buy goods and
services from firms

Circular flow in a market economy

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Economic Systems Around the World
Capitalism
• Encourages entrepreneurship
and the private ownership of
the factors of production
• Encourages profit making as
an incentive
• Operates under the concept
of supply and demand

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Interactions Between Business and Government

Customer Competitor Regulator

Provider of Provider of Essential

Taxation Agent
Incentives Services

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Interactions Between Business and Government
Government as Regulator
• Regulates through administrative boards,
tribunals, and commissions

• Promotes healthy competition between

businesses

• Protects consumers

• Achieves social goals

• Protects the environment

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Interactions Between Business and Government
Government as Taxation Agent

Revenue Tax Progressive Revenue Tax

Regressive Revenue Tax Restrictive Tax

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Interactions Between Business and Government
Government as Provider of Incentives

Provides Aid and Provides Incentives to

Financial Assistance stimulate growth (revenues
and employment)

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Interactions Between Business and Government
Government as Provider of Essential Services

highways postal service money

military education health services

sewer and emergency

sanitation services

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The Canadian Market Economy

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 Supply and Demand
Dealing with a Shortage

A shortage drives
prices up

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 Supply and Demand
Dealing with a Surplus

A surplus drives
prices down

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Private Enterprise and Competition
• Private enterprise occurs in a market economy with little
government restriction
• Under this system individuals
o can own property
o have freedom of choice
o have the freedom to earn profits
o have freedom to compete

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Private Enterprise and Competition
• Competition
o occurs 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

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Private Enterprise and Competition

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Private Enterprise and Competition
Degrees of Competition

Perfect Competition

Monopolistic Competition

Oligopoly

Monopoly

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Private Enterprise and Competition
• Perfect Competition
o many sellers; product is basically identical
o relatively easy to enter the industry
o individual firms have no control over price

• Monopolistic Competition
o few to many sellers; product is seen
as unique by some buyers (not all)
o differentiated brands have some
(minor) control over pricing

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Private Enterprise and Competition
• Oligopoly
o a few large suppliers dominate
o high barriers to entry
o products are seen as similar
o prices gravitate toward a common “market price”
• Monopoly
o one producer and source of supply
o unique product
o complete control over price
o no competitors

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Private Enterprise and Competition

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Quick-Check Questions
1) If Drake is playing to a sold-out concert this Friday night but
tickets are still in high demand, concert-goers are likely to buy
tickets from ‘scalpers’ at prices considerably higher than the
original price. This situation can be described as a:
A) shortage; in which quantity demanded exceeds quantity
supplied.
B) surplus; in which quantity demanded exceeds quantity supplied.
C) shortage; in which quantity supplied exceeds quantity
demanded.
D) surplus; in which quantity supplied exceeds quantity demanded.

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Quick-Check Answer
1) If Drake is playing to a sold-out concert this Friday night but
tickets are still in high demand, concert-goers are likely to buy
tickets from ‘scalpers’ at prices considerably higher than the
original price. This situation can be described as a:
A) shortage; in which quantity demanded exceeds quantity
supplied.
B) surplus; in which quantity demanded exceeds quantity supplied.
C) shortage; in which quantity supplied exceeds quantity
demanded.
D) surplus; in which quantity supplied exceeds quantity demanded.

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Quick-Check Questions
2) The political basis for the free market economy is called
____________ which allows private ownership of the factors of
production and encourages entrepreneurship by offering profits as
an incentive.
A) Marxism
B) Capitalism
C) Consumerism
D) Socialism

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Quick-Check Answer
2) The political basis for the free market economy is called
____________ which allows private ownership of the factors of
production and encourages entrepreneurship by offering profits as
an incentive.
A) Marxism
B) Capitalism
C) Consumerism
D) Socialism

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Quick-Check Questions
3) The most important difference between command economies and
market economies is______.
A) access to human rights
B) who controls the factors of production
C) the government in power
D) freedom of the press

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Quick-Check Answer
3) The most important difference between command economies and
market economies is______.
A) access to human rights
B) who controls the factors of production
C) the government in power
D) freedom of the press

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Quick-Check Questions
4) The markets for laundry detergents, soft drinks and cars are all
dominated by just a few producers. In terms of competition these
markets are described by the term:
A) perfect competition
B) monopoly
C) oligopoly
D) pure competition

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Quick-Check Answer
4) The markets for laundry detergents, soft drinks and cars are all
dominated by just a few producers. In terms of competition these
markets are described by the term:
A) perfect competition
B) monopoly
C) oligopoly
D) pure competition

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Quick-Check Questions
5) Which of the following best describes the Canadian economic
system?
A) command system
B) mixed market economy
C) socialist system
D) market economy

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Quick-Check Answer
5) Which of the following best describes the Canadian economic
system?
A) command system
B) mixed market economy
C) socialist system
D) market economy

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Next Week
• Online Webinar
o May 13 at 7 pm.
o Link is posted on the announcement section.
o Will be taped in case you can’t make it.
• Chapter 4 - Small Business, Entrepreneurship and Ownership
Options

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