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.

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

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

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

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

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

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.

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.

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?