ECONOMIC SYSTEMS AND THE INDUSTRIAL REVOLUTION

Opening Question  What is an economy?  What comes to mind when you think of an “economy”?

Economic Changes  From feudal/land ownership to mercantile  A lot of resources = a lot of products  Foreign trade

Economic Systems  Look to answer the questions…  What to produce?  Who will produce it?  How it will be produced?  Include…  Traditional (subsistence)  Market  Command

Traditional  Make food/supplies for themselves  Little surplus  Trade only if available  Sometimes called subsistence farming  Poorer areas

Market  People freely choose what to buy and sell  Natural resources are abundant which means many products can be made  Many types of businesses  England began to transition to market economy during the Industrial Revolution

Components of Market Economy (Adam Smith)  Free-enterprise: Competition of businesses to determine price  McDonald’s dollar menu vs. BK’s value menu  Supply and Demand: factors that determine price  Demand goes up, price goes up…supply goes up price goes down  Capitalism: businesses privately owned

Command Economy  Government controls resources, production and prices  Profit not necessarily important  Look to provide for people if bread costs $1 to make but no one can afford, they will charge $0.25

Components of Command Economy (Karl Marx)  Communism: economic and political system in which Communist party (government) controls production and resources  Russian Revolution  Socialism: collective ownership of land and production (in theory)  Command Economies look to keep the playing field relatively level