1. Economics – Chapter 18, Section 1 The Spectrum of Economic Systems
Capitalism
The means of production are privately owned.
Supply and demand determine prices.
Businesses are free to direct resources into profitable activities.

2. Economics – Chapter 18, Section 1 The Spectrum of Economic Systems
Advantages
Efficiency
Freedom
Decentralization
Smaller role for gov’t
High degree of consumer satisfaction

3. Economics – Chapter 18, Section 1 The Spectrum of Economic Systems
Disadvantages
Does not provide for the production of many public goods
Produces only for those who have the resources to pay for products and services
Often uncertain and unstable

4. Economics – Chapter 18, Section 1 The Spectrum of Economic Systems
Socialism
Gov’t owns, and runs, some of the basic productive resources in order to distribute output to meet social goals.
Advantages
Distribution of benefits throughout a society
People using their electoral power to influence economic decisions

5. Economics – Chapter 18, Section 1 The Spectrum of Economic Systems
Disadvantages
Lowered efficiency
High taxes
Gov’t substituting its judgment for the judgment of the market
Tendency for special interests to become entrenched

6. Economics – Chapter 18, Section 1 The Spectrum of Economic Systems

7. Economics – Chapter 18, Section 1 The Spectrum of Economic Systems
Communism
Theoretically, communism is a selfless society in which the needs of the individual are subservient to the needs of the society.
In reality, communism is often a rigid command-type economy in which the state owns all economic goods.
State officials, rather than the forces of the market, answer the basic questions of what, how, and for whom to produce.

8. Economics – Chapter 18, Section 1 The Spectrum of Economic Systems
Disadvantages
Individual freedom is lost, as is the incentive for people to work hard.
Usually fails to meet the needs and wants of consumers.
Centralized planning is inefficient and lacks the flexibility to deal with day-to-day changes.

9. Economics – Chapter 18, Section 1 The Spectrum of Economic Systems
Answer the following questions.
Consider some of the goals you have for yourself. What characteristics of capitalism will help you reach them? Which might make it more difficult?
Given the amount of gov’t involvement in economic decisions, can economic socialism and political democracy coexist?
What are the worst consequences to individual workers of centralized economic planning in a communist economy?