1. Chapter 18 The Spectrum of Economic Systems

2. Capitalism The means of production are privately owned
Supply and demand determine prices
Businesses are free to direct resources into activities that promise the greatest profits

3. Advantages of Capitalism
Efficiency
Freedom
Highly decentralized
High degree of consumer satisfaction
Flexibility to accommodate change
Wealth accumulation

4. Disadvantages of Capitalism
Does not always satisfy everyone’s needs
Ignores the production of many public goods
Produces for only those who have a demand (ignores poor people, unemployed and elderly people)

5. Socialism
An economic system in which government owns and runs some of the basic productive resources in order to distribute output in ways deemed to be in the best interest of society
Democracies

6. Advantages of Socialism
Addresses the FOR WHOM question directly
Those who are not fortunate or productive enough to earn a competitive income still share in the benefits of society

7. Disadvantages of Socialism
Less efficient than capitalism
Taxes are generally higher

8. 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.

9. Advantages of Communism
Equality
Health care, transportation, military and education are provided at little or no cost
Lack of uncertainty concerning careers and job security
Allows the economy to shift directions in a relatively short period of time

10. Disadvantages of Communism
Individual freedom is lost!
Lacks effective incentives that encourage people to work hard
Fails to meet the needs and wants of consumers
Inefficiency of centralized planning
Lack the flexibility to deal with day-to-day changes