1. Economic Models

2. Captialism
In a purely capitalist system, the economy is regulated by self-interest and market competition.
Self-interest: consumers (you included) want to buy goods and services at the lowest price possible.
Market competition: businesses produce goods at a price consumers are willing to pay.

3. Capitalism
Law of Supply: producers will supply more products when they can charge higher prices and fewer products when they must charge lower prices.
Law of Demand: consumers will demand more of a product as the price of that product decreases. Similarly, they will demand less of a products as the price increases.

4. Adam Smith’s Economic Beliefs
The laws of supply and demand are always at work.
Their interplay, Smith referred to as the Invisible Hand.
The invisible hand keeps everything at a state of equilibrium.
Equilibrium: when buyers and sellers’ plans are in balance– the quantity supplied equals the quantity demanded.
Therefore, there is never a need for any person, organization, or institution to “interfere” with business.
Laissez-faire system of economics should prevail.
Laissez-faire: roughly translated from French into English as “let people do as they choose.”

5. Socialism
In a pure socialist system, economic activity is controlled by social need and by the government through central planning.
Extension of Socialism– Communism.
Communism: a political and economic system in which property is communally owned (no private property).

6. Totalitarianism
The goal of communism has never been achieved in practice.
In theory, in a communist society, over time the government’s power will wither away.
In real life, communist governments often led to totalitarian forms of government.
Totalitarianism: a government in which those in positions of power exercise complete authority over the lives of individual citizens.

7. ECONOMIC MODELS Capitalism Socialism
factors of production owned by individuals
factors of production owned by the government
Deal with 3 main questions
What goods and services should be produced?
How should they be produced?
For whom should they be produced?
forces of profit and competition regulate economic activity
economic activity regulated by the government
minimum government interference
pure form is communism