ECONOMIC SYSTEMS Command vs. Market

WHAT DO THE FOLLOWING HAVE IN COMMON? Basketball Team Flea Market Human Body Assembly Line Governments Telephones

SYSTEM a group of individual parts that work together to form a whole What are the different “parts” of the economy?

MARKET ECONOMY Market Economy-a system in which private individuals control the means of production. 1. Business owners answer the questions What?, How?, and For Whom? 2. CAPITALISM-example of a market economy.

CAPITALISM WHERE DID THE IDEA COME FROM? Adam Smith-Scottish philosopher Wrote the book A Wealth of Nations He said individuals seeking profit would benefit the whole society. Came up with the idea of laissez-faire economics This means “to let alone”-meaning the government should stay out of the economy. Many Americans, including Alexander Hamilton, James Madison, and Thomas Jefferson borrowed Smith’s ideas

BASIC IDEAS OF CAPITALISM WHAT ARE THE BASIC IDEAS? A Consumer Sovereignty B. Economic Freedom C. Private Property Rights D. Competition E. Voluntary Exchange F. Profit Motive

COMMAND ECONOMY COMMUNISM AND SOCIALISM-examples of a command economy Command Economy-a system in which private individuals have little control over the means of production. The Government answer the questions What?, How?, and For Whom? COMMUNISM AND SOCIALISM-examples of a command economy

MIXED ECONOMY Most countries including the U.S. are mixed Mixed Economy-have elements of both command and market economies. Most countries including the U.S. are mixed

Is the U.S. a true capitalist economy? NO! The U.S. is mixed. The U.S. is a mix of both capitalism and socialism There is a great deal of private ownership, but there is also government regulation The U.S. is however, closer to capitalism than any other system.

COMMAND OR MARKET: place the following in the Venn Diagram 1. A man gets a loan from a bank and opens his own business. 2. The government heavily taxes business owners. 3. The government offers welfare programs to help the people. 4. There is a big gap between the rich and poor because people have the chance to make money. 5. The government makes most of the decisions about the economy. 6. The economy is driven by people making choices for themselves. 7. People are motivated by the fact they can keep all the profit they make from their business. 8. The government tries to close the gap between the rich and the poor. 9. The government regulates businesses so they do no rip off consumers.