- the study of how people meet their basic needs 1.What should be produced? 2.How should it be produced? 3.Who gets what is produced?

Unlimited wants of society v.Limited resources Things that people make Things that people do for others Trade off: Guns or butter? (Guns=military spending, Butter= social programs)

You follow your ancestors’ traditions! Primarily agricultural Centered around family or tribal unit Decisions are made based on passed down beliefs Your occupation is determined at birth Resources are allocated by inheritance Tools are primitive

Major occupations of a traditional economy Hunting Farming Herding

Subsistence agriculture- almost everything that is grown is intended for the family’s use (rarely a surplus) Cottage industries- working at home either weaving, making furniture/clothes (any goods produced by hand) Examples: Bushmen of South Africa, Berber tribe of Algeria, villages in South Asia

People try to make as much money as they can Profit- what remains after the costs of running the business are paid

How much of a good producers are willing to make and sell How much of a good consumers are willing to buy

Limited gov’t interference in the economy Acts as umpire- providing and enforcing a set of common rules, maintaining a monetary system, providing for the nation’s defense, and protecting people’s right to own property Ex. breaking down monopolies

The most important businesses producing goods (mines, factories, businesses) are owned by the gov’t - Ex: railroads, airlines, hospitals, banks, utility companies, mining, and oil -Encourages private ownership of small businesses -Started as political movement in response to injustices and exploitation -Sees the gov’t as the protector of the worker Gov’t provides free schooling, low-cost housing, public transportation, and a national health program

A lot of socialist nations have become capitalist through privatization of gov’t owned companies GOAL: Fairer distribution of income among all members of society and meet people’s basic needs for free or at a low cost

Karl Marx: Advocate that the workers rise up and violently overthrow the wealthy business owners All decisions are made by gov’t leaders (decide what, how, and for whom goods and services will be produced) No private property Based on cooperation Examples: China, North Korea, Vietnam, and Cuba GOAL: classless society

Communist countries were not able to predict society’s needs Workers failed to do their best without incentives for performance For extra benefits, officials were bribed Unable to keep up with the production of goods from free enterprise systems Example: failure of the USSR

Economic Systems What to produce? How is it produced? Who gets it? Traditional Free enterprise Socialist Communist

Economic Systems What to produce? How is it produced? Who gets it? Traditional Set by tradition Through passed down methods Decided by inheritance Free enterprise Interaction b/w producers and consumers Producers decide how to produce Whoever can afford it Socialist determined by gov’t and by individuals All citizens Communist Determined by gov’t planners

Free Enterprise Socialism Communism United States United Kingdom South Korea Mexico France India China Venezuela Cuba North Korea