–          North Americans live in a free market society

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–          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

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–          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

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