Warm Up List the 3 branches of Government Objective: Students will be able to explain and contrast the major economic systems.

Economic Systems

Factors of Production Factors of Production are the resources (limited) used to create all goods and services. LAND LABOR CAPITAL ENTREPRENEUR

Factors of Production LAND LABOR CAPITAL ENTREPRENEUR Goods/Services Human Capital Capital Goods Goods/Services

3 Basic Types of Economic Systems Capitalism Communism Socialism

Copy the graphic organizer below Economic System Advantages Disadvantages Capitalism Communism Socialism

Capitalism Capitalism - the means of production are privately owned; supply and demand determine prices; businesses are free to seek the greatest profits Example: United States modified capitalist system.

Capitalism Advantages Disadvantages economic efficiency economic freedom consumer demands are mostly satisfied in general, the capitalist countries have accumulated the greatest wealth Disadvantages pure capitalism does not provide public goods for everyone (roads, schools, judicial system, national defense) based on ability to pay, which leaves many without goods and services such as basic healthcare high level of inequality of wealth in U.S.

Adam Smith A Scottish philosopher who wrote a book called “The Wealth of Nations” In this book he described how the market functions. Smith believed that the economy is made up of countless transactions and that every buyer and seller is moved by Self Interest.

Adam Smith The Invisible Hand - Self Interest and Competition work together to regulate the market. Self Interest moves people to buy goods/services and businesses to produce them. Competition causes more production and moderates businesses quests for higher prices. Ultimately this allows for consumers to get what they want at prices that closely reflect what is cost to produce them.

Communism Communism - political and economic framework where all property is collectively owned, labor is organized for the common advantage of the community, and everyone consumes according to their needs Example: no modern country has achieved the modern ideal of pure communism; Cuba, Soviet Union, and North Korea fell short of ideal

Communism Advantages equality of wages state provides basic services and public goods at little to no cost (healthcare, transportation, education, national defense) job security allows the economy to shift directions in a relatively short period of time

Communism Disadvantages loss of individual freedom lacks incentives to work hard often does not meet needs/wants of consumers b/c decisions are made by govt. extremely difficult to centrally plan an economy historically has led to authoritarian rule

Socialism Socialism - economic system in which the govt. owns and runs some of the productive resources in order to distribute output in ways deemed to be in the best interest of society; most govts. are democratically elected Example: Sweeden

Socialism Advantages govt. provides public goods (healthcare, transportation, education, unemployment benefits) provides more security for workers and the disadvantaged (poor and elderly) more equality of wealth; less poverty direction of economy can be influenced by voters in democratic elections

Socialism Disadvantages increased costs of production potential to be less efficient than capitalism higher taxes

Influences of Communism & Socialism Karl Marx & Freidrich Engels - German philosophers that wrote “The Communist Manifesto” which is considered one of the most influential political documents ever written. Marx and Engels expressed Socialist ideas that influenced the communist and socialist movement. Abolition of poverty Heavy and progressive tax Confiscation of property from all emigrants and rebels Central banking Free education and public schools

Communist Manifesto Argued that the history of the world has been the history of class struggle In each era, one class was pitted against another: master against slave, lord against serf, capitalist against worker, the oppressed vs. the oppressor Argued that the oppressed of his day was the proletariat (people who work for others b/c they do not have means of production of their own) and that the capitalists or bourgeoisie (people who own the means of production) were the oppressors

Communist Manifesto The proletariat was oppressed because of the difference between the wage paid to the worker and the price of the goods produced, which was unfairly kept by the capitalists as profits Eventually the proletariat would rise up in revolution and overthrow the capitalist class At first a “dictatorship of the proletariat” would arise, but then would be replaced by a “classless society” without govt. in which the people would produce to the best of their abilities and consume to the extent of their needs

Communism in the Soviet Union Vladamir Lenin - In 1917 Vladamir Lenin and the Bolsheviks led a political revolution and gained control of Russia. They called themselves the “Communists” after “The Communist Manifesto”. By 1920 the Soviet Union had a command economy. Bolsheviks - Communist political party

Answer questions: 12-26 on page 678 Then complete the Venn diagram below comparing the 3 economic systems Communism Socialism Capitialism