–          North Americans live in a free market society

–          In a free market, businesses can make a profit, which means that successful business people can keep some of the money that they make

–          Profit drives business; the more successful a business becomes, the more profit the owner keeps

–          Profits may be reinvested in new technology, business growth, paying off debt, and other areas that will often produce more profit

–          Profit is the result of good management, marketing, use of human resources, and financial performance

–          Some of the profits of a business are paid to the government in taxes, which support institutions that assist all Canadians

–          Profit is the reward that a business person receives for risking his or her time, energy, capital, and reputation

–          A business will earn this reward only if the risk pays off

–          A free- market society allows Canadians to hold private property, which means that people can buy things and keep them, sell them, or give them away

–          Some people use their property to make a profit

–          They may decide to buy equipment and raw materials to make products

–          Then, they sell their products for a people buy things at one price to sell to others at a higher price

–          Still others purchase the means to provide a service to others at a cost

–          The people who build factories or stores, or own trucking companies or advertising agencies, hope to make a profit when they risk their private property

–          Often, people will lend their private  property to others, investing in a business and spreading the risk among many people

–          If the risk- taking venture is successful, the investors will make a profit on their investment

–          If it is not, then the investors will lose

–          Finally, having a free market means that competition is allowed, even encouraged

–          Competition defines the structure of the market

–          There are four major market structures: perfect competition, monopolistic competition, oligopoly, and monopoly

–          Perfect competition is a market characterized by a large number of small companies, non of whom have an opportunity for market control

o   Perfect competition requires government legislation to restrict growth in order to prevent market dominance by any of the competitors

–          Monopolistic competition is a market consisting of a large number of companies, each having an opportunity for a degree of market control

–          Oligopoly is a market with a small number of large companies, each with a substantial amount of market control

–          Monopoly is a market in which a single company have complete market control

–          The government insists upon competition; therefore, the government regulates monopolies

–          The government also legislates against trade practices that limit competition unfairly, such as price fixing, restrictive mergers, or exclusive dealing

–          Government- controlled market structures, such as those in communist countries or totalitarian dictatorships, do not permit free enterprise

–          These government ban competition and forbid private ownership

–          The benefits of competition

o   Competition contributes to the Canadian encouraging the creation of new businesses

o   One business will start within idea= for example, a machine that plays and records television programs

o   Then, someone else things of a way to improve the product, maybe by adding a remote control, and anew business opens to produce the new model

o   Another business creates a model with a playback system that provides sharper slow- motion images; so , that business manufactures, markets, and sells that system

o   Still another business starts manufacturing videocassettes

o   Now other companies start making video cameras and video rental stores open

o   Each of these businesses encourages competition

o   Competition will result in better services, and extras

o   Each of these new businesses provides jobs and salaries and is interdependent on even more businesses

o   The wide selection of goods and serves that are offered to consumers in the marketplace is another benefit of competition

o   Consumers have a choice of products styles, product types, price and quality

o   Without competition, there would be little or no choice for the consumer

o   It is only the competitive market that permits and encourages variety

o   Competition and productivity

§  One of the most effective ways to compete is by charging less than your competitors

§  In order to charge less for the same product or services, businesses must become more efficient, use fewer resources, or make better deals with suppliers

§  For a business to improve its productivity or its product, it may have to develop something new

§  Many businesses have a R&D department that support scientists and technicians who work on new ideas

–          Direct and Indirect Competition

o   Products that a very similar are in direct competition for consumer dollars

o   With direct competition, the consumer chooses among products in the same category

o   In indirect competition the products or services are not directly related to one another

author avatar
William Anderson (Schoolworkhelper Editorial Team)
William completed his Bachelor of Science and Master of Arts in 2013. He current serves as a lecturer, tutor and freelance writer. In his spare time, he enjoys reading, walking his dog and parasailing. Article last reviewed: 2022 | St. Rosemary Institution © 2010-2024 | Creative Commons 4.0

Leave a Reply

Your email address will not be published. Required fields are marked *

Post comment