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Chap 1: Introducing the contemporary business world

The concept of business and profit
Business: an organization that produces or sells goods or services in an effort to make a profit
Profit: what remains after a business’ expenses have been subtracted from its revenue
Economic system: allocates a nation’s resources among its citizens [deciding who those resources would go to]

Factors of production: the key difference between economic systems - the basic resources that a country’s businesses use to produce goods and services
Factors:
Labour: Human resources
Capital: financial resources [money to start a business]
Entrepreneurs: people who accept the opportunities and risks in creating business
Natural Resources: physical resources
Information Resources: market forecasts, economic data, specialized knowledge of employees [industry related publication]

Types of economic systems:
Command economy: government controls all or most factors of production and makes all or most production decision Two basics form:
Communism: government owns and operates all sources of production [government was not suppose to stay in control, only temporary, but it did, end up being open business]
Socialism: government owns only selected major industries [worker can choose their employer, public welfare, high taxes]
Market economy: individuals control production and allocations decisions through supply and demand Market: mechanism for exchange between the buyers and sellers of particular good Two market relationships:
Input market: firms buy resources from suppliers
Output market: firms supply goods and services in response to demand
Capitalism: political basis of market processes [market decides what, when and who we give it to, buyer and seller have freedom of choice, ownership is open to all]
Mixed market economy: both command and market Privatization:

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