BEP201 - Unit 1 Test (Economic Foundations)

Business

- Business is the organized effort to produce goods or services.

- It satisfies both needs (e.g., food, shelter) and wants (e.g., entertainment, luxury).

- Businesses can range from local shops to global corporations.

- Their main goal is to fulfill consumer demands while making a profit or achieving a social goal.

Profit Businesses

produces goods or services to meet consumer needs and wants with the goal of making profit.

Profit

is the money left after all expenses are paid

Profit Business has...

Revenue, Expenses, Cost, and Profit

Revenue

income made from normal business operations (products sold or services provided).

Expenses

costs a business pays to run and operate, like paying for materials, salaries, rent, and utilities. These are the things the business needs to spend money on to keep running.

Cost

the money required to produce or provide the goods and services.

Profit

income left after all costs and expenses are paid.

Equation for Profit

Revenue - Expenses = Profit (or Loss if it's -)

When business make profit it can...

1. reinvest money for expansion

2. provided improved goods and services

3. give the owners fund to spend on needs or wants

Term used when business debts are paid and no finance problems...

Solvent

Non-profit organizations...

main goal to raise funds for a specific goal.

Example of non-profit organizations...

charities and charitable organizations are called non-profit and are allowed to raise such funds.

Not for profit organization...

also raises funds for a specific goal but it also uses an excess money to pay their members who work for them.

A co-operative...

consists of an independent association of persons who join together to meet economic, social, and cultural needs and goals.

Examples of not for profit organization...

Red cross and United Way.

Examples of non-profit organizations...

Salvation Army, WWF, Oxfam

Examples of co-operatives non-profit...

Credit Unions.

Small Business...

1-99 employees.

Medium Business...

100-499 employees.

Large Business...

500+ employees.

SMB amount...

1 million in Canada provides jobs for more than 60% of the Canadian workforce.

Types of Businesses...

1. Service oriented

2. Merchandising

3. Manufacturing

Service oriented =

provides services rather than physical products to consumers. Ex. hair salons, consulting firms, repair services.

Merchandising =

buys products to resell them to consumers for profit. Ex. Amazon, Retail Stores, Walmart, Target

Manufacturing =

business that produces goods from raw materials to sell them to other businesses or consumers. Ex. Toyota, Apple, IKEA

Direct Distribution =

sell their products or services DIRECTLY to the customer without using retailers or wholesalers. Ex. Apple selling products through their OWN stores and website. Farmers

Indirect Distribution =

uses intermediaries such as wholesalers, retailers, or agents to sell their products to consumers. Ex. Nike selling their products through retailers like Foot Locker or Walmart.

Forms of Business Ownership...

1. Sole proprietorship

2. Partnership

3. Corporation

4. Co-operative

5. Franchise

Sole Proprietorship =

business owned and operated by a single individual who has full control and responsibility for the business.

Examples of Sole Proprietorship =

Local coffee shop or freelance graphic designer

Partnership

A business owned and operated by two or more individuals who share profits, losses, and responsibilities.

Examples of Partnership

A law firm or medical practice where multiple professionals share ownership and decision-making.

Corporation

A legal entity that is separate from its owners (shareholders). It can enter into contracts, own property, and be taxed independently. Owners' liability is limited to their investment.

Examples of Corporation

Apple Inc., Coca-Cola, or Microsoft — large companies with shareholders and limited liability.

Co-operative

A business owned and operated by its members, who work together to meet shared economic, social, or cultural needs. Profits are usually reinvested or shared among the members.

Examples of Co-operative

REI (Recreational Equipment, Inc.), a consumer co-op for outdoor gear, or Ocean Spray, a co-op of cranberry farmers.

Franchise

A business model where a franchisor allows a franchisee to operate a business using the franchisor's brand, systems, and support, in exchange for fees or royalties.

Examples of Franchise

McDonald's, Subway, or 7-Eleven — businesses where individual franchisees operate using a proven business model and brand.

Goods =

physical itemrs that can be touched or stores (ex. books and clothing)

Services =

actions and experienced provided to customers. (ex. haircuts, banking)

Corporations Types...

1. Private Corporation

2. Public Corporation

3. Crown Corporation

4. Parent Company

5. Subsidiary

6. Holding Company

Private Corporation

owned by a small group of individuals or entities. Shares are not available to the public on the stock market. no stock. Ex. Cargill Inc. (no publicly trade shares)

Public Corporation

A corporation whose shares are traded on public stock exchanges. It is owned by shareholders who can buy and sell stock. Ex. Tesla

Crown Corporation

owned by the government. These businesses are usually created to provide public services. Ex. Canada Post

Parent Company

owns controlling interests (more than 50% of shares) in another company. Ex. Alphabet Inc. parent company of google

Subsidiary

company controlled by parent company, usually through ownership of more than 50% of its shares. Ex. YT - a subsidiary of Google (Alphabet Inc.)

Holding Company

does not produce goods or services itself but owns enough shares in other companies to control them. It holds assets such as stocks, bonds, or other investments. Ex. Berkshire Hathaway (owns subsidiaries like dairy queen, geico, and etc)

Business

Refers to the organized efforts/activities of individuals

Channels of Distribution

Direct: Business sells directly to customers (e.g., Apple Store). Indirect: Business sells through intermediaries like retailers (e.g., Nike selling through Walmart).

Role in Community

Businesses provide goods and services that meet community needs. They generate employment, support local economies, and contribute to societal development.

Jobs Provided

Businesses create employment opportunities across various sectors such as manufacturing, retail, healthcare, and technology.

Producers

Businesses or individuals who create goods or services. Example: Apple (producer of iPhones).

Consumers

Individuals or organizations that purchase goods and services. Example: Consumers buying iPhones.

Relationship of Influence & Power

Consumers influence businesses by deciding what to buy, which affects production and prices. Producers influence consumers by offering products, marketing, and pricing strategies.

Role of Marketplace

The marketplace is where producers and consumers interact, and supply/demand forces shape pricing and availability.

Consumer Motivations

Consumers are motivated by needs, wants, status, convenience, and emotional factors.

Buying Behaviours

Impulsive: Buying without prior planning. Routine: Habitual purchases (e.g., food). Limited: Moderate decision-making (e.g., clothes). Extensive: Complex decisions (e.g., purchasing a house or car).

Influence on Product

Consumers demand certain features, quality, or design.

Influence on Price

High demand and low supply lead to higher prices.

Influence on Service

Customers may demand faster, more efficient services and better customer support.

Attracting Consumer Interest - Questions

Do I need this product? How much can I afford to spend? Is it the best option for my needs? Why should I buy here (reputation, price, service)?

Attracting Consumer Interest - Strategies

Offer promotions or discounts. Create a unique selling proposition (USP). Focus on convenience or customer experience.

Competition

Rival businesses offering similar products/services.

Innovation

Introducing new ideas, products, or services to the market.

Obsolete

Products or services no longer in demand due to technological advancements or market changes.

Inventory

The stock of goods available for sale.

Needs

Essential items required for survival. Example: Food, water, shelter.

Wants

Desirable but non-essential items that improve quality of life. Example: Luxury cars, designer clothes.

Maslow's Hierarchy of Needs

Theory: People are motivated by a series of needs arranged in a hierarchy from basic survival to self-actualization.

Physiological Needs

Basic needs like food, water, and shelter.

Safety Needs

Security, safety, and protection.

Love/Belonging Needs

Social needs like friendships and relationships.

Esteem Needs

Respect, recognition, and self-esteem.

Self-Actualization

Reaching personal potential, creativity, and fulfillment.

Physiological Needs

Example: Ads for grocery stores or food delivery services.

Safety Needs

Example: Ads for insurance companies or security systems.

Love/Belonging Needs

Example: Ads for dating services, social networks.

Esteem Needs

Example: Ads for luxury cars, designer fashion.

Self-Actualization

Example: Ads for travel experiences, self-improvement courses.

Impulse Buying

Sudden, unplanned purchase. Example: Candy at checkout counter.

Routine Buying

Regular, habitual purchases. Example: Groceries, household products.

Limited Buying

Moderate decision-making process. Example: Clothing, gadgets.

Extensive Buying

Complex and thoughtful decisions. Example: Buying a house, car, or appliance.

Decision-Making Process

5 Steps in Extensive Decision-Making.

Problem Recognition

Realizing a need or desire.

Information Search

Gathering information on possible solutions.

Evaluation of Alternatives

Comparing products or services.

Purchase Decision

Deciding on the best product to buy.

Post-Purchase Evaluation

Assessing satisfaction after the purchase.

Market Forces

Competition - Influence on Market; Attracting Customer Interest.

Competition

Influences pricing, product features, and customer service as businesses strive to attract consumers.

Attracting Customer Interest

Use marketing strategies, quality improvement, and competitive pricing.

Perfect Competition

Many small businesses, identical products, no pricing power. Example: Agricultural products.

Monopolistic Competition

Many businesses, differentiated products, moderate control over prices. Example: Restaurants.

Oligopoly

Few businesses dominate, significant control over prices. Example: Airlines, car manufacturers.

Monopoly

One business dominates the entire market, with full control over pricing. Example: Utility companies (e.g., water, electricity).

Economic Resources

Resources used to produce goods and services, classified into Natural, Human, and Capital resources.

Natural Resources

Raw materials from the Earth. Example: Oil, timber, minerals.

Human Resources

Labor and skills provided by people. Example: Employees, entrepreneurs.