COMMUNISM AND CAPITALISM Comparing the Economic Systems

Economy  How a country distributes money and wealth.

Goods  A physical product that can be sold for money.  Examples: clothing, cars, books, computers, food.

Services  Anything someone does for money.  Examples: doctors, teachers, cleaners, mechanics

Producers  The people who make goods in order for them to be sold.  Example: Nike, Apple, Honda

Consumers  People who buy goods and services.

Sellers  The middleman. Buys products from consumers and sells it to consumers.  Examples: Wal-Mart, Best Buy, Stop & Shop

The Means of Production  What a producer needs in order to produce a good.  Examples: Land, labor, raw materials, machinery, power, factories

Cost of production  How much money it costs to produce a good. (How much money the means of production cost.)

Profit  The money producers earn when the costs of production are considered.  Selling Price – Cost of Production = Profit

Whoever owns the means of production gets to keep the profits.

Capitalism  An economic system where private individuals own the means of production.  Under Capitalism, private individuals get to keep the profits. Example: Bill Gates owns Microsoft, so he gets to keep Microsoft’s profits.

Communism  An economic system where the government owns the means of production  Under Communism, the government keeps the profits. They decide how the profits are going to be divided among the people.

Under Capitalism  Some people get to be very very rich, while many people are poor.  There is a high level of income inequality.

Under Capitalism  Good: More Freedom. Possibility of moving into a higher class level.  Bad: Many poor people. Unemployment.

Under Communism  Very few people are either very rich or very poor.  Very little income inequality.

Under Communism  Good: Not as many poor people. Everyone gets their basic necessities met.  Bad: Less freedom. Government makes a lot of decisions about your life.