What is economics? The study of how goods and services are produced, distributed, and consumed. The people who make goods or services are called “producers.” The people who buy goods or services are called “consumers.”

How is economics related to the Industrial Revolution?

There are 3 types of economic systems: Capitalism Communism Socialism

Capitalism Sometimes called a “market economy.” Ex. U.S.A. People own companies and decide what to produce to make consumers happy. Business owners can earn big profits or can lose their money if a business fails. Some businesses sell stock to get more capital to invest. New York Stock Exchange

Communism and Socialism The government makes economic decisions about what should be produced, how much it should cost. Two types of command economies are socialism and communism. Workers arrive at a factory in the old Soviet Union in 1929.

In socialism, the government runs some industries, such as oil, and uses profits to pay for health care, education. Ex. Venezuela In communism, the government runs all industries, owns all property, sets wages, and prices, and people must do as they are told. Ex. North Korea Venezuela’s President Hugo Chavez

Communism vs. Capitalism Capitalists say that people have no reason to do a good job in communism because everyone gets the same pay. Products are boring and poorly made. Communists say that capitalism is unfair to the poor because people at the top of the company get rich while workers get low wages. They also say capitalists wipe out little companies and destroy the environment to get money.

Continuum of Economic Systems Market Economy Capitalism On the far right Command Economy Communism On the far left Socialism Left of center but right of communism

Which economic system would be described as the following: "You have two cows. The government takes one of your cows and gives it to your neighbor"

Socialism. While there are many definitions and varieties of socialism, one of the key concepts seems always to be the premise that government should regulate the distribution of goods produced by the people. Some socialists would even argue that government should regulate the very means of production as well. The goal is usually a society in which all its members have a balanced and equal opportunity to survive.

Which economic system could be explained by the following: "You own two cows. The government takes both of your cows, gives you some of the milk, and shares the remainder with the rest of your neighbors.”

Communism. Communism in its purist form is the existence of a moneyless and classless society in which all of society's members share everything in common, including all means of production. Obviously, such a system would rely on an innate goodness of mankind. The analogy in the question jokingly explains why such a system most likely will fail. Most people would be too selfish to comply so that the government would have to interfere to force compliance.

How would you explain capitalism using the cow analogy? Remember: Capitalism as an economic system not only adheres to the concept of private ownership of the means of production (owning the cows) but also to the concept of private profit, meaning that the individual who owns the means of production has the freedom to use that means to increase his or her accumulation of wealth Finish this sentence to describe capitalism: "You own 2 cows…

"You have two cows. You sell one of them and buy a bull“ (selling of one cow to buy a bull to produce more cows to produce more milk)