Unit 1: Economic Basics

1.1 Understanding Business

What is Business?

● Definition: An organization, often started by an entrepreneur, that produces or sells

goods or services to meet the needs, wants, and demands of consumers/customers.

Key Terms:

1. Entrepreneur: A person who takes risks to start a venture and seize an opportunity.
2. Producer: An individual or business that creates a product for profit.
3. Consumer: Someone who uses goods/services.
4. Customer: Someone who buys goods/services.

Importance of Consumers:

● Businesses exist because of consumer demand.

● Consumer Purchasing Power:
○ Consumers/customers choose where to buy and what to pay.
○ Example: Decisions at a grocery store (brand vs. price).

Needs vs. Wants:

● Need: Essential for survival (e.g., food, shelter).

● Want: Non-essential items we can live without.

Goods vs. Services:

● Goods: Tangible, can be seen and touched.

● Services: Intangible, assistance without a physical product.

Examples:

● Goods: Items sold in Canada (e.g., clothing, appliances).

● Services: Help provided, such as hairstyling or plumbing.
Types of Goods and Services:

1. Essential Goods: Tangible, necessary for survival (e.g., food, clothing).

2. Essential Services: Intangible, necessary for survival (e.g., heating, lighting).
3. Luxury Goods: Enjoyable but not essential (e.g., diamond rings, SMART TVs).
4. Luxury Services: Enjoyable but non-essential (e.g., limo rides, manicures).

Decision-Making:

● Decision-Making Model: A process to evaluate choices effectively

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1.2 Maslow's Hierarchy of Needs

1. Physiological Needs
- needs that are necessary to our physical survival
- Examples: Food, water, clothing, sleep, medicine, and shelter
- these needs must be satisfied before we can move to the next level

2. Safety Needs
- protecting ourselves from harm – includes physical and financial security
- Examples: Car seats for infants, bicycle helmets, alarm systems for homes

3. Love and Belonging Needs

- accepted by others, relationships, having friends
- Example: Joining a school club

4. Esteem Needs
- who we are and what we do is important
- achievement, gaining status or approval and recognition from others
- Example: Buying luxury cars

5. Self- Actualization
- Fulfilling our true, unique potential
- Doing things that are personally rewarding
- Example: Graduating, joining the army, charity work

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1.3 Factors of Production & Demand

Key Questions:

1. What factors affect businesses and how can we understand them?

2. What are the factors of production?
3. What is demand?
4. What is the law of demand?

Factors of Production (Economic Resources):

1. Natural Resources:
○ Materials from earth, water, and air (e.g., oil, trees, agricultural products).
2. Human Resources:
○ People working to create goods and services (e.g., factory workers, nurses).
3. Capital Resources:
○ Assets like buildings, factories, equipment, and money.
4. Entrepreneurship:
○ Individuals who organize other resources and take risks.

Demand:

● Definition: The quantity of goods/services consumers are willing and able to buy at a
given price.
● Law of Demand:
○ Quantity demanded increases as price decreases.
○ Quantity demanded decreases as price increases (all else being equal).

Factors Affecting Demand:

1. Income: Higher income increases demand.

2. Consumer Tastes: Changing preferences affect popularity.
3. Future Expectations: Anticipated price increases boost current purchases.
4. Population Changes: Growth in specific demographics increases specific demand.
5. Prices of Other Goods:
○ Substitute Goods: Alternatives (e.g., chair vs. bench).
○ Complementary Goods: Goods used together (e.g., ketchup and hot dogs).

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1.4 Supply and Equilibrium

Key Questions:

1. What factors affect businesses?

2. What is supply?
3. How is the price of a good/service determined?
4. What factors affect supply?

Supply:

● Definition: The quantity of goods/services suppliers are willing to produce at a given

price.
● Law of Supply:
○ Quantity supplied increases as price increases.
○ Quantity supplied decreases as price decreases.

Factors Affecting Supply:

1. Resource Availability: Limited resources lower supply.

2. Labour & Costs of Inputs: Higher costs reduce supply.
3. Consumer Wants: Drives production adjustments.
4. Technology: Improves efficiency and reduces costs.
5. Price of Related Goods: Suppliers may shift to more profitable goods.

Equilibrium:

● The point where demand equals supply, determining price and quantity.
● Low prices increase demand.
● High prices decrease demand.
● Equilibrium ensures a balanced market.

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1.7 Production Process

4 Stages of the Production Process:

Purchasing

- Responsible party: Purchasing agent/owner.

- Factors considered: Quality, price, costs (e.g., transportation, taxes), and ethical sourcing.

Terms:

- Raw Materials: Inputs transformed into products.

- Quality: Durability, specifications, and reputation.
- Price and Costs: Includes hidden costs like storage or delivery penalties.

Processing

- Conversion process: Raw material → Semi-finished/finished products.

- Example: Sugar cane → Sugar; Wheat → Flour.

Quality Control

- Ensures adherence to standards set by company, government, or organizations (e.g., ISO).

Grading

- Compares products against standards for size and quality.

- Examples: Diamonds, eggs, and gasoline.

Factors of Production: Natural Resources, Labour, Capital, Entrepreneurship.

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1.8 Improving Productivity

What is Productivity?

- Efficiency of resource use compared to output.

- Increased productivity → Reduced cost per unit → Higher profits.

Improving Productivity

- Training: Initial, ongoing, retraining, and specialized training.

- Capital Investment: New machinery, technology, or facilities.
- Technology Investments: Robotics, automation, Just-in-Time inventory systems.
- Strategies: Increase speed, improve quality, and reduce costs.

Example:

- Employee A serves 100 customers/hour, B serves 50/hour.

- A is twice as productive, but other factors (quality of service, task difficulty) could
explain differences.

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 Unit 2: International Business & Ethics

2.3 International Business Structures

Types of Business Structures:

1. Joint Venture
○ A business arrangement where two or more parties agree to pool resources for a
specific project or business activity.

2. International Franchise
○ A system where a franchisee is given the right to operate a business under the
franchisor’s brand internationally.

3. Strategic Alliance
○ An agreement between companies to pursue objectives while remaining
independent organizations.

4. Merger
○ The combination of two companies into one entity, often to enhance
competitiveness or market reach.

5. Offshoring
○ Moving part of a company’s operations to another country to reduce costs or
access specialized expertise.

6. Multinational Corporation (MNC)

○ A company that operates in multiple countries but is managed from one (home)
country.

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3.1 Ethics

Key Terms:

Ethics

- Rules that help distinguish between right and wrong.

Values

- Core beliefs that guide decisions about what is right and wrong.

Morals

- Guidelines to decide what is good or bad in conduct.

Code of Ethics

- A formal document outlining how employees should act in specific situations.

Whistle-blowing

- Reporting unethical or illegal behavior to authorities or the public.

Ethical Dilemma

- A moral conflict where a choice must be made between right and wrong.

Questions to Consider in Ethical Situations:

● Who will benefit from the action?

● Who will be harmed by the action?
● What are the advantages of the action?
● What are the potential drawbacks?
● Will this action be ethically sound in the long run?
● Would a trusted figure (e.g., your mother) approve of this decision?

Examples of Ethical Situations:

● Adding false hours to a friend’s timesheet.

● Purchasing items at a discounted rate under questionable conditions.
● Keeping excess change returned during a transaction.
3.1 Business Ethics and Corporate Social Responsibility (CSR)

CSR Principles

Businesses that demonstrate CSR focus on:

1. Providing a Safe and Healthy Work Environment

○ Initiatives like employee wellness programs, on-site daycare, fitness facilities, and
health and safety committees.

2. Adopting Fair Labour Policies

○ Paying wages above the minimum, offering flexible hours, and fair treatment for
employees.

3. Protecting the Environment

○ Supporting community-based environmental programs and initiatives to make the
company greener

4. Being Truthful in Advertising

○ Avoiding misleading claims, deceptive statements, or illustrations in
advertisements.

5. Avoiding Price Discrimination

○ Maintaining pricing integrity by adhering to the manufacturer’s suggested retail
price.

6. Donating to Charity
○ Encouraging charitable payroll deductions and organizing charitable events.

CSR Values

CSR involves ethical values such as:

● Contributions to communities
● Protection of customers
● Fair treatment of employees and shareholders

Disclosure Obligations

Corporations and employees must share important information with stakeholders, including:

● Shareholders, partners, lenders, insurers, regulators, consumers, and employees.

3.3 - Laws that Govern Ethics

Key Laws Governing Corporate Ethics

1. Workplace Safety
○ Occupational Health and Safety Act (OHSA) (Ontario):
■ Rights include:
■ The right to know (about workplace hazards)
■ The right to participate (in workplace health and safety)
■ The right to refuse unsafe work.

2. Anti Discrimination Issues

○ Prohibits discrimination based on religion, gender, sexual orientation, or
disabilities.
○ Gender Discrimination: Differential treatment based on sex.
○ Glass Ceiling: Invisible barriers affecting career advancement for women and
minorities.

3. Harassment
○ Includes threatening or disturbing behavior that makes individuals uncomfortable.

4. Accessibility
○ Canadian Human Rights Act:
■ Businesses must accommodate employees with disabilities unless it causes
undue hardship.

5. Environmental Responsibility
○ Environmental Protection Act:
■ Laws to prevent environmental disasters (air, land, water).
○ Kyoto Protocol:
■ International agreement to reduce greenhouse gas emissions.

6. Labour Practices
○ Employment Standards Act:
■ Minimum conditions of employment.
○ Pay Equity:
■ Equal pay for work of equal value regardless of sex.
○ Privacy Laws:
■ Businesses must disclose why employee information is required and how
it will be used