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

2. Economic Systems

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

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

5. 3 Basic Types of Economic Systems
Capitalism
Communism
Socialism

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

7. 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.

8. 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.

9. 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.

10. 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.

11. 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

12. 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

13. 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

14. 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

15. 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

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

17. 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

18. 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

19. 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

20. 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

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