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ECONOMIC THEORIESC A P I T A L I S M
S O C I A L I S M
C O M M U N I S M
ECONOMIC SYSTEM
The way a country chooses to use its resources to produce and distribute goods and services for its people
CAPITALISM
How is a country’s economic system and political system connected?
CHARACTERISTICS OF CAPITALISM
Capitalism is an economy based on private ownership and productive property
Productive Property
Productive property like a workers tools are used to produce things of value
THE FOUR FACTORS OF PRODUCTION
Land
Management
Labor
Capital
LAND
Can be used for agriculture , mining, forestry, industry, and retail stores
LABOR
Men and women who work in business and industry
MANAGEMENT
Skilled men and women who organize other factors of production and make businesses run efficiently.
CAPITAL
Money, factories, or machinery used to produce goods and services.
Capitalist- a person who has capital and puts it to productive use
FREE-ENTERPRISE SYSTEM
In a free enterprise system people are free to start and run enterprises, or businesses.
Five Characteristics of Free Enterprise1.Private ownership2.Property rights3.Private decision makers4.Competition5.Freedom of Choice
PRIVATE OWNERSHIP
I N D I V I D U A L S O R G R O U P S O F P E O P L E O W N M O S T O F T H E M E A N S O F P R O D U C T I O N I N A F R E E E N T E R P R I S E
PROPERTY RIGHTS
T H E G O V E R N M E N T W O R K S T O P R O T E C T P R I VAT E P R O P E RT Y.
A P E R S O N C A N U S E P R I VAT E P R O P E RT Y T O T U R N A P R O F I T.
T H E G O V ’ T C A N R E G U L AT E S O M E P R O P E RT Y R I G H T S .
PRIVATE DECISION MAKERSB A S I C D E C I S I O N S A B O U T W H AT T O P R O D U C E A N D H O W M U C H T O P R O D U C E I S L E F T U P T O I N D I V I D U A L S A N D C O M PA N I E S
COMPETITIONC O M PA N I E S C O M P E T E F O R C U S T O M E R S , T H I S C O M P E T I T I O N A L O N G W I T H T H E L AW O F S U P P LY A N D D E M A N D H E L P T O D E T E R M I N E T H E P R I C E O F G O O D S A N D S E RV I C E S
High supply + low demand = Low supply + high demand =
FREEDOM OF CHOICE
C O N S U M E R S C A N C H O O S E W H AT T H E Y B U Y , H O W M U C H , A N D F R O M W H O M . W O R K E R S H AV E T H E C H O I C E T O W O R K W H E R E T H E Y WA N T
MIXED ECONOMYB O T H P R I VAT E B U S I N E S S A N D T H E G O V E R N M E N T P L AY A R O L E I N T H E E C O N O M I C S Y S T E M
G I V E A N E X A M P L E .
The United States is an example of a mixed economy
KINDS OF BUSINESS IN A FREE ENTERPRISE
Kind Advantages Disadvantages
Sole Proprietorship-A business owned by one person
Partnership- A business owned by two or more people
Corporation- Has many owners called share holders. Corporations are owned by the public
SOCIALISMI S B O T H A N E C O N O M I C A N D A P O L I T I C A L WAY O F T H I N K I N G . I T S AY S T H AT T H E N AT I O N ’ S W E A LT H S H O U L D B E D I S T R I B U T E D T O E V E RYO N E I N A FA I R WAY
In socialism, ownership is public rather than private. The
government, not the individual, is at the center of the economy
A SOCIALIST’S THEORY OF EQUALITY
A S O C I A L I S T B E L I E V E S T H AT P E O P L E N E E D T O B E E Q U A L P O L I T I C A L LY A N D E C O N O M I C A L LY. R E A L E Q U A L I T Y O N LY H A P P E N S W H E N T H E P U B L I C C O N T R O L S T H E C O U N T RY ’ S E C O N O M Y
THE ORIGIN OF SOCIALISM
S O C I A L I S M C A M E A B O U T D U R I N G T H E I N D U S T R I A L R E V O LU T I O N . T H E I N D . R E V. G AV E B I RT H T O M A N Y FA C T O RY J O B S . T H E S E J O B S W E R E D A N G E R O U S A N D R E Q U I R E D L O N G H O U R S F O R W O R K E R S I N H O R R I B L E C O N D I T I O N S . W O R K E R S W E R E PA I D V E RY L I T T L E F O R T H E I R L A B O R . P E O P L E B E G A N T O L O O K F O R C H A N G E S .
SOCIALIST ECONOMIES
Socialist Economies
Nationalization- is the gov’t takeover of privately owned businesses
The Welfare State- Everyone should have food and a place to live. The gov’t provides healthcare and unemployment benefits.
High Taxation- The government’s money comes from taxes. Public services are expensive.
Command Economy- The gov’t makes decisions about the economy, not individuals.
IS SOCIALISM GOOD OR BAD?
Positive Negatives
Socialism evens out differences.
Socialism is too complicated.
Socialism gives people control over their lives.
Socialism robs human incentive.
COMMUNISM
Is a political system in which the government owns all property and is ruled by one party with complete power over the economy.
THE UNITED SOVIET SOCIALIST REPUBLICU.S.S.R
- The USSR was the first communist state. It lasted from 1917 until 1991. Communism in the USSR did not work.
- The best example of communism exists today in China.
KARL MARX AND COMMUNISM
Father of Communism
- The Industrial Rev. brought only suffering to the working people of the world
- The bourgeoisie (upper-class) take advantage of the proletariat (lower-class working people)
MARX’S IDEAS
The ProblemThe Bourgeoisie make a profit off the proletariat’s hard work, and the gov’t protects the power of the bourgeoisie.
The GoalAll people should be economically equal. Wealth should be distributed.
The SolutionThe working people should unite and take control of the gov’t and the economy!
The AftermathEconomic classes would eventually disappear, and then gov’t wouldn’t be necessary.
STEPS TO A COMMUNIST REVOLUTION
1. The Bourgeoisie controls production and profits
2. The Proletariat rise up against the Bourgeoisie
3. The Proletariat create a temporary government
4. The Proletariat distributes the wealth equally to
everyone
5. The government is no longer necessary and is
abolished
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