ECONOMICS

WHAT IS ECONOMICS?  THE STUDY OF HOW INDIVIDUALS AND NATIONS MAKE CHOICES ABOUT HOW TO USE RESOURCES TO FULFILL THEIR WANTS AND NEEDS

4 MAIN RESOURCES KNOWN AS THE FACTORS OF PRODUCTION 1. LAND -REFERS TO ALL NATURAL RESOURCES 2.LABOR -ANYONE WHO WORKS 3.CAPITAL -ALL PROPERTY PEOPLE USE TO MAKE GOODS AND SERVICES 4.MANAGEMENT -ABILITY TO ORGANIZE BUSINESS, NEW TECHNIQUES

4 MAIN ECONOMIC SYSTEMS

TRADITIONAL  BASED ON CUSTOMS AND BELIEFS –AGRICULTURE –HAND CRAFTED GOODS –USED IN AFRICA AND PARTS OF SOUTH AMERICA OF SOUTH AMERICA

COMMAND  INDIVIDUALS HAVE LITTLE (IF ANY) INFLUENCE OVER ECONOMIC DECISIONS  GOVERNMENT CONTROLS FACTORS OF PRODUCTION  USED IN NORTH KOREA, FORMER SOVIET UNION, CHINA

MARKET  GOVERNMENT HAS NO INTERVENTION IN ECONOMIC DECISIONS  USED WHERE?

MIXED  CONTAINS CHARACTERISTICS FROM ALL ECONOMIC SYSTEMS  VERY COMMON THROUGHOUT THE WORLD  USED IN THE UNITED STATES

CAPITALISM  A. DEFINITION: –MEANS OF PRODUCTION ARE PRIVATELY OWNED –SUPPLY AND DEMAND DETERMINE PRICES –BUSINESS HAS FREEDOM TO MAKE DECISIONS

CAPITALISM B. ADAM SMITH 1.THE WEALTH OF NATIONS 1776 C. LAISSEZ FAIRE THEORY – “HANDS OFF” 1) Capitalism without government regulation 2) Laissez faire Capitalism was blamed for the following conditions following the Industrial Revolution 1) CHILD LABOR 2) LOW WAGES 3) NO BENEFITS (UNEMPLOYMENT) 4) DANGEROUS/UNHEALTHY WORKING CONDITIONS

CAPITALISM 3)FREE ENTERPRISE ( capitalistic ideal) 1. EQUAL OPPORTUNITIES 2. SUCCESS AND FAILURE

BUSINESS ORGANIZATION FREE ENTERPRISE 1.SOLE PROPRIETORSHIPS -owned by 1 person, most basic/common (14 million), easier and less expensive to start and run 2.PARTNERSHIPS -two or more individuals own, legal binding agreement, 3.CORPORATIONS -legal entity owned by individual stock holders 4.COOPERATIVE OWNERSHIPS -business owned and operated by a group 5.STATE OWNERSHIP -business owned by govt.

ADVANTAGES EFFICIENCY: Many buyers and sellers, resources are used in the most profitable way Many buyers and sellers, resources are used in the most profitable way FREEDOM: Producers have freedom (profit motive), Producers keep the fruits for their efforts SATISFACTION: Variety of products are produced to satisfy the consumer

DISADVANTAGES  PURE CAPITALISM (Laissez-Faire) Ignores: –The poor –The unemployed –The elderly *Develops a wide range of “social classes” *Monopolies/Oligopolies can be developed

MIXED CAPITALISM  INDIVIDUALS CONTROL ASPECTS OF BUSINESS WITH GOVERNMENT REGULATIONS  UNITED STATES

SOCIALISM  DEFINITION:  BELIEF THAT DEMOCRATIC MEANS SHOULD BE USED TO DISTRIBUTE WEALTH EVENLY THROUGHOUT A SOCIETY

SOCIALISM A)CHARACTERISTICS 1) COLLECTIVE 2) DEMOCRATIC IDEALS 3) RE-DISTRIBUTION OF WEALTH TO PREVENT CONCENTRATION OF WEALTH PREVENT CONCENTRATION OF WEALTH B)GOVERNMENT RESPONSIBILITIES 1) FREE MEDICAL AND DENTAL 2) FREE EDUCATION 3) SOCIAL SECURITY 4) HOUSING 5) GUARANTEED EMPLOYMENT

ADVANTAGES  UNFORTUNATE AND UNPRODUCTIVE PEOPLE STILL SHARE IN THE BENEFITS  PEOPLE USE ELECTORAL POWER TO INFLUENCE MANY OF THE WHAT, HOW, AND FOR WHOM QUESTIONS

DISADVANTAGES  LESS EFFICIENT THAN CAPITALISM (MORE WORKERS THAN NECESSARY)  TAXES ARE VERY HIGH

COMMUNISM  EXTREME FORM OF SOCIALISM  DEFINITION: –ALL PROPERTY IS COLLECTIVELY OWNED –LABOR IS ORGANIZED FOR THE COMMON ADVANTAGE OF THE COMMUNITY –EVERYONE CONSUMES ACCORDING TO NEEDS

COMMUNISM  B) ECONOMIC AND POLITICAL POWER RESTS IN THE HANDS OF THE CENTRAL GOVERNMENT (DICTATOR)

ADVANTAGES  EQUALITY (Wages are nearly identical)  SOME SOCIAL BENEFITS (health care, education, military defense)  FULL EMPLOYMENT

DISADVANTAGES  INDIVIDUAL FREEDOM LOST  NO INCENTIVES  FAILS TO MEET THE WANTS OF CONSUMERS  LACKS FLEXIBILITY TO DEAL WITH CHANGES  HIGH TAXES

COMMUNISM  BACKGROUND OF KARL MARX 1) COMMUNIST MANIFESTO (1848) * Short book, talked of revolt 2) DAS KAPITAL *Outlined: A) WHAT IS WRONG WITH CAPITALISM A) WHAT IS WRONG WITH CAPITALISM B) HOW COMMUNISM WOULD TAKE OVER B) HOW COMMUNISM WOULD TAKE OVER C) WHAT THE FUTURE UTOPIA WOULD BE LIKE C) WHAT THE FUTURE UTOPIA WOULD BE LIKE

COMMUNISM  MARX THEORIES 1) Dialectical Materialism Class struggle between the proletariat and the bourgeoisie which will end in revolution and the triumph of communism PROLETARIAT: WORKERS BOURGEOISIE: WEALTHY CAPITALISTS 2) Law of Capitalist Accumulation -Rich get Richer/ Poor become poorer 3) Labor Theory of Value -Value of a product comes from the labor put into the product -Thus the worker should receive the benefit of the product…….not the business owner

Communism 4)Instances where Marx was wrong 1)“Communism would start in Industrialized Europe or the U.S.” – not in agrarian U.S.S.R 2)“Communist government will wither away”

FASCISM A. Definition: A form of capitalism (private ownership) with strict government control *Wages*Prices*Production B.Involves a Dictatorship C.Extreme Nationalism – Militaristic D.Racial Purity