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Published byValérie St-Jacques Modified over 6 years ago
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Why 1. Why do you think Dr. X is trying to find a cure for AIDS. 2
Why 1. Why do you think Dr. X is trying to find a cure for AIDS? 2. Why do you think athletes want to win the league MVP? 3. Why do airplane pilots want to always land safely?
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Adam Smith Smith argued the world would be an orderly, better place, with increased prosperity if people followed their own self interests.
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“It is not from the benevolence of the butcher, or the baker, that we expect our dinner, but from their self-love”
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Smith thought social harmony would result without any government direction “as if by an invisible hand.”
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He defended the idea of a free economy in his book The Wealth of Nations.
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Another way to say a free economy is laissez faire: The idea that government should not interfere with or regulate industries and businesses.
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Great invisible hand cartoon
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The opposite is government intervention
Examples Sales tax Minimum wage Maximum work hours Safe Working conditions Sick and vacation pay Disability pay Product safety
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1. Tariffs - high taxes on imported goods
Examples of government intervention with regards to international trade (trade barriers): 1. Tariffs - high taxes on imported goods 2. Quotas: limit the quantity of imported goods 3. Tough government regulations
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Smith thought the only legitimate functions of the state were:
National defense Establish property rights Establish legal system Promote free trade Invest in trade-promoting infrastructure
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Adam Smith is considered the father of Capitalism
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Capitalism: An economic system based on private ownership and on the investment of money in business ventures in order to make a profit. Also known as the free-enterprise system or market economy
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The aims of a market economy are to produce the best goods at the lowest price
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Capitalist often oppose government efforts to help poor workers because it lowers profits.
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Capitalism’s five main features are: 1
Capitalism’s five main features are: 1. Private property: resources and capital are owned by people and private institutions, not the government
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2. Self-interest: each economic unit (person or business) attempts to do what is best for itself
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3. Competition: a large number of independent buyers and sellers is best
Dunk Video
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4. Reliance on price (economists call this the market): if prices go up, the producer makes more and if the prices go down, the consumer buys more (the Law of Supply and Demand)
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5. Limited government (laissez faire economics): pure capitalism is seen as self-regulating; only broad legal limits should be established by the government
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Free trade dvd Boring cartoon
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