Economic Systems

CapitalismFree Enterprise

Market Economy

Definition An economic system based on private

ownership of property and means of distribution

“Private “= people or individuals

Goal Maximum profit for owners

How is the goal of Capitalism achieved?

Private control of resources, production, distribution

Laissez Faire Theory Government should play little to NO part in the economy

How is the goal of Capitalism achieved?

Law of Supply and Demand High demand and low supply= high price High supply and low demand = low price

Role of Consumer

Competition

Karl Marx’s ideas in response to the Industrial Revolution gave rise to 2 types of economies Socialism Communism

Socialism

Definition An economic system in which the

major industries resources, and services are owned by the government

Goal To provide all citizens with basic

economic needs

How is the goal of Socialism achieved?

Government owns main industries, resources, and distribution methods

Some private ownership (small business)

The creation of a welfare state

How is the goal of Socialism achieved?

Creation of a welfare state What you get

Housing, schooling, health care, retirement pension, unemployment insurance, guaranteed vacation time, maternity / paternity leave

What you give Everyone pays really high taxes

Communism

Definition Government controls all parts of the

economy

Goal To create a classless society replacing

competition with cooperation to ultimately meet the needs of everyone.

How is the goal of Communism achieved?

Government controlseverything!!!!!!!!!!

Production Distribution Resources Land Consumption

Mixed Economy

An economic system that is shaped by a variety of factors

private ownership government involvement culture/ tradition

Most economies today are mixed!

Shanghai, China 1990

Shanghai, China 2010

In what ways is the US economy mixed?

What is controlled by the government?

What is privately controlled?

What is influenced by culture and tradition?