5MGTA Business Lec 6business management lecture notes chapters student notes PDF

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MGTA Business Lec 6 Understanding and Measuring the Business Environment How to measure an economic system’s performance? Must look at these questions; Is an economic system producing: - Lots of goods and services? - More every year? - Lots per citizen? - Using all of the factors - Sharing the benefits? Measures of Performance - Gross Domestic Product (GDP) - GDP growth - GDP per capita - Productivity - Participation and employment - Distribution and equality Gross Domestic Product: - “Gross” = large “Domestic” = within the borders “ Product” what is produced - GDP= total value of all goods and services produced within a country. - If a country has a large GDP, many workers using many factors, are producing many things of value Gross National Product - Total value of all goods and service produced by factors belonging to a country GDP Vs GNP - GDP measures value of goods and services produced IN Canada - GNP measures value of goods and services produced by Canadian organisations, anywhere in the world - Ex: If Microsoft opens an office in Canada, the jobs and revenue generated increase Canadian GDP (it happens here) - The jobs and revenue generated increase US GNP – it’s a US organization GDP and GNP They are both: One big number, value of goods & services produced, measures of activity GDP: Where activity happens GNP: who owns the organisation GDP much more common, more widely used. Top 3 countries with the largest GDP : US, China, Japan

GDP Measures size : GDP measures an economy’s size, not is its growth, wealth, opportunity, or distribution. GDP Growth: An economic system should grow, these indicates more people in more businesses producing more goods and providing more services Slow Growth/New Growth: - Falling GDP indicates: fewer people, in fewer jobs, more failed businesses, this is called recession Fast Growing Countries Poor countries have greatest capacity for growth. They start from a low base, have more catching up to do. GDP Growth - A well preforming economy should: Make more goods (food, clothing, housing) - Provide more services (health, education) - Create more jobs (meaningful occupation) GDP per Capita - GDP measures only size, doesn’t measure wealth. - GDP per capita = GDP per person - “per capita” = “per person” GDP Per Capita - Measures wealth of “average” citizen, some “big” economies are “poor” EG India What makes a country “Rich” - “Productivity” : a ratio, outputs to inputs, products to factors - GDP per Capita is measure of productivity - A country has high productivity when it has plentiful, cheap, high quality factors of production put to good use. Productivity Is economic system using all resources at its disposal? If not, the economy is producing less than it could. Participation & Employment Participation: - Is everyone who wants to work allowed to work? - Is everyone who wants to work, motivated to look? Employment: - Can everyone who wants to work find a job?

Unemployment - % of people who are actively looking for work, but can’t find work - Lowers productivity ; people who want to work can’t find work, people are doing less than they could. Less is being produced, less is being consumed. Unemployment in Canada - Historically, Canada’s unemployment rate is higher than rate in the USA - Larger % of work force not working - This is one cause to our lower wealth Inflation- Canada - Historically Canada’s inflation rate similar to rate in the USA - A constant increase in prices of all commodities - Bank of Canadas target: 1-3% Wealth Distribution - High “GDP per Capita” suggest “average” person is “rich” - But what if a few people are very rich and others are very poor? - Wealth inequality...