Chapter 2 How the Business System Works Copyright © 2008 McGraw-Hill 1

advertisement
How the Business System Works
Chapter 2
Copyright © 2008 McGraw-Hill
Ryerson Ltd.
1
Chapter Outline









The Right of Private Property
Individualism and Economic Freedom
Equality of Opportunity
Competition and Profits
The Work Ethic
Consumer Sovereignty
The Role of Government
The Fundamentals and Canadian Capitalism
Various Forms of Capitalism
Chapter 2
Copyright © 2008 McGraw-Hill
Ryerson Ltd.
2
The Right of Private Property
The legal right to own and use economic
goods—for example, land and buildings
 Ethical implications:

– Government has last say
– Uneven distribution of wealth
– Infringement of copyright rights
Chapter 2
Copyright © 2008 McGraw-Hill
Ryerson Ltd.
3
Calgary
Chapter 2
Copyright © 2008 McGraw-Hill
Ryerson Ltd.
4
The Right of Private Property
The legal right to own and use economic
goods—for example, land and buildings
 Ethical implications:

– Government has last say
– Uneven distribution of wealth
– Infringement of copyright rights
Chapter 2
Copyright © 2008 McGraw-Hill
Ryerson Ltd.
5
Individualism and
Economic Freedom
Individualism: The view that the individual,
and not society or a collective, is the
paramount decision maker in society;
assumes that the individual is inherently
decent and rational.
 Economic freedoms: Exist when the
business system operates with few
restrictions on its activities.

Chapter 2
Copyright © 2008 McGraw-Hill
Ryerson Ltd.
6
Equality of Opportunity
The assumption that all individuals or
groups have an even chance at responding
to some condition in society.
 Ethical implications:

– Difficult to achieve in capitalistic system
– Wealth created not distributed equally
– Inequities such as layoffs, drops in living
standards, excessively high executive salaries
Chapter 2
Copyright © 2008 McGraw-Hill
Ryerson Ltd.
7
Competition


The condition in a market system in which many
rival sellers seek to provide goods and services to
many buyers.
Ethical implications:
– Oligopolies (few sellers in industry) or even
monopolies (one seller) can be created
– More difficult for some firms to enter certain industries
– Firms might engage in anti-competitive activity
Chapter 2
Copyright © 2008 McGraw-Hill
Ryerson Ltd.
8
Profits
The excess of revenues over expenses;
closely associated with competition.
 Ethical implications:

– Profits sometimes viewed with disdain or as
immoral
– Taxation of excessive profits
Chapter 2
Copyright © 2008 McGraw-Hill
Ryerson Ltd.
9
The Work Ethic

A code of values, or a body of moral
principles, claiming that work is desirable, a
natural activity, and good in and of itself.
Chapter 2
Copyright © 2008 McGraw-Hill
Ryerson Ltd.
10
The Work Ethic

Ethical implications:
– Government programs and society’s
expectations have influenced individuals’
attitudes toward work
– Individuals now expect more from government
and business enterprises in terms of working
conditions, benefits, and salaries
Chapter 2
Copyright © 2008 McGraw-Hill
Ryerson Ltd.
11
Consumer Sovereignty

The assumption existing in an economy that
consumers have and exercise power over
producers through the decisions they make
in purchasing the goods and services
provided by corporations.
Chapter 2
Copyright © 2008 McGraw-Hill
Ryerson Ltd.
12
Consumer Sovereignty

Ethical implications:
– Consumers not always aware of alternative
products available
– Consumers’ preferences are shaped by
advertising
– Producers have power to ignore consumer
wishes
Chapter 2
Copyright © 2008 McGraw-Hill
Ryerson Ltd.
13
The Role of Government

Laissez-faire approach (i.e., “leave us
alone”) suggests minimal involvement of
government other than national security,
internal law and order, and a system of
currency and measures.
Chapter 2
Copyright © 2008 McGraw-Hill
Ryerson Ltd.
14
The Role of Government

Ethical implications:
– Government now an influential stakeholder
(e.g., subsidies, taxation, tariffs, regulations,
legislation, loans, grants, ownership)
– Government can restrict capital movement,
impose product standards, prevent businesses
from shutting down plants
Chapter 2
Copyright © 2008 McGraw-Hill
Ryerson Ltd.
15
The Fundamentals and
Canadian Capitalism


An economic system that allows for private
ownership of the means of production (land,
labour, and capital) and assumes that economic
decision making is in the hands of individuals or
enterprises that make decisions expecting to earn a
profit.
Several pros and cons exist regarding capitalism.
Chapter 2
Copyright © 2008 McGraw-Hill
Ryerson Ltd.
16
Various Forms of Capitalism

Consumer capitalism
– United States, Britain, Canada, Australia

Producer capitalism
– France, Japan, Mexico

Family capitalism
– Taiwan, Malaysia, Thailand, Indonesia

Frontier capitalism
– Russia, China
Chapter 2
Copyright © 2008 McGraw-Hill
Ryerson Ltd.
17
Download