1. Chapter 2 Economic Systems

2. Capitalism- Factors of Production privately owned
Economic System
Capitalism- Factors of Production privately owned
Less govt. intervention
Free market economy
Profit incentive
Competition
Laissez-faire = “Let it Be”

3. Command Economy Mixed Economies No private ownership of FOP
Govt. makes economic decisions (allocation of resources)
Emphasis on economic equality
Based on Marxism
Mixed Economies

4. How Economic Systems Developed
Division of Labor
Divide production into tasks
Leads to: Specialization
Concentration on one task
More efficient, productive
Advancement
Specialized Capital
Trade
Civilizations

5. Increased Productivity
Assembly Line
Division of Labor

6. What, How and For Whom Allocation of Scarce Resources Capitalism
Decisions made by people in markets
What goods and services should be produced?
Supply and Demand
Consumers decide through choices
How should they be produced?
Profits
Efficiency
For Whom?
People who make valuable contributions get paid more.

7. Section C: The Role of Profits
=Incentives (reason)
Hardwork
Innovation/Invention
Efficiency
determines allocation of resources
Profitable firms get the resources
Creates efficiency / Innovation

8. Section D: Economics in Other Systems
Command Economy
Govt. decides allocation
Creates “Equality”
No profit incentive
Creates full employment
For Whom
“From each according to his ability, to each according to his need.”
Distribution of Wealth