systems

In a business sense (which is what we are concerned with) a closed system is where the company follows a fixed set of 'rules' which do not change. So, for example, the standard bookkeeping system is a close system because they will always follow the same 'rules' with regard to the debits and credits. An open system is where the company changes the 'rules' as things change in the outside world. For example (and I assume you have already watched the pricing lectures) a company might have no competitors and be fixing selling prices by simply adding a percentage to the cost. Suppose now competitors appear selling the same product at a lower price. If our company had a closed system on pricing they would continue to simply add the % to cost. However, more sensibly now that there are competitors they would look at other ways of determining a selling price - that would be an open system. They would be changing their 'rules' in response to changes in the environment (the outside world).