1. OUTLINE NOTES CH. 17 ECONOMICS

2. ECONOMICS Economics- how people make their livings, earn & spend $, trade with one another and invest in their future. Economist- someone who studies economics.

3. ECONOMICS Problem of Scarcity People have unlimited wants but society can only produce a limited # of goods & services @ 1 time. Goods- things people make. Ex. Food, toys, clothes, cars Services- what people do for others Ex. Plumbers, doctors, waitresses, mechanics

4. ECONOMICS So every society must answer 3 questions: 1. What should be produced? 2. How it should be produced? 3. Who should get it? How a society answers these 3 questions determines what kind of economic system it has.

5. ECONOMICS TYPES OF ECONOMIC SYSTEMS

6. TRADITIONAL ECONOMIC SYSTEM Economic decisions based on ancestors, customs, & beliefs handed from one generation to another. Born into position in village/tribe usually hunt, fish, or herd animals Often no private property- everything owned by family or village. Little trade with outsiders- produce & consumer goods/services w/in tribe. Change & growth proceed very slowly Production by: subsistence agriculture or cottage industries

7. TRADITIONAL ECONOMIC SYSTEM Subsistence Agriculture- Produces only enough to feed farmer’s family, very little if any traded or sold. Ex.- most of Africa, Asia, & parts of Latin America

8. TRADITIONAL ECONOMIC SYSTEMS Cottage Industries In their spare time people create goods for sale or trade. Common in traditional societies, especially among farmers. Ex. Tribal clothes made by many African tribes. Quilts made by early settler families.

9. CAPITALISM (FREE ENTERPRISE/FREE MARKET SYSTEM) An economic system in which people own their own goods and property. Some people invest their money in different ways of producing things (factories, machines, and land) or in distributing goods so that they may gain a profit. In a free enterprise system, people are free to produce whatever they wish and to buy whatever they can afford. The three basic economic questions are answered by the interplay between consumers (buyers) and producers (sellers).

10. HOW PRICES ARE DETERMINED Supply How much of a good producers are willing to make and sell. If the supply is high but demand is low, the price goes down. Demand How much of a good consumers are willing to buy. When the demand for a good is high, the price goes up.

11. ROLE OF GOVERNMENT Government acts as an umpire, providing and enforcing a set of common rules, maintaining a monetary system, providing for the nation's defense, and protecting people's right. In a free enterprise system, people sometimes look to government to break up or regulate companies that have obtained so much power that they could defy market forces. A company that can do that is called a Monopoly.

12. PRODUCTION METHODS Commercial Agriculture Farmers grow food not just for themselves, but in order to sell it to others for cash. In commercial agriculture, crop production is intended for distribution to wholesalers and retailers, such as supermarkets and grocery stores. Large-scale commercial agriculture makes production cheaper. Commercial Industry Goods are manufactured in factories for sale throughout the country or overseas.

13. ECONOMICS COMMUNISM

14. Communism was developed in the 1800’s by Karl Marx(1818 -1883). Marx believed that business owners (whom he called capitalists) used their wealth to take advantage of workers by taking away most of the value of what they produced. Marx predicted that the conditions of workers would grow so bad that they would eventually rise up and overthrow their capitalist rulers in a violent revolution. After the revolution, workers would establish an equal society and live in perfect harmony, under what Marx called "communism." In theory, there are no social classes in a communist system. Cooperation is supposed to replace competition, allowing everyone's needs to be met.

15. COMMUNISM In practice, communism is an economic system in which all important economic decisions are made by government leaders. These leaders decide what, how, and for whom goods and services will be produced. The way goods are produced and distributed is controlled by government leaders for the good of society as a whole. Government officials develop national plans, often for five- year periods, that specify which goods each factory will make.

16. Role of Government Makes all decisions about production. Private Property No private property of national resources, all own by government. Cooperation Based on cooperation & all working for common good and equality. Major Goal Achieve a classless society & equality for all MAIN FEATURES OF COMMUNISM

17. ECONOMICS SOCIALISM

18. Socialism is an economic system in which the most important businesses producing goods (mines, factories, businesses) are owned by the government rather than by individuals. Socialist governments typically own their nation's railroads, airlines, hospitals, banks, utility companies, mining or oil companies and other major industries. However, unlike communism, socialism encourages private ownership of small businesses (such as shops and small manufacturers). Some economists refer to socialist economies as "free market socialism" because these economies do not involve state planning.

19. SOCIALISM Socialism first began in the 1800s as a political movement in response to the injustices of industry and the exploitation of workers in Europe. Many workers had to work long hours for low wages in unsafe conditions. Socialist reformers believed the best way to protect workers was to have the government control the major means of production. They saw the government as the best protector of the worker.

20. SOCIALISM Socialists believed that workers could improve their own conditions by voting for sympathetic government leaders. The government could then own basic industries and also provide essential services, like free schooling, low-cost housing, public transportation, and a national health program.

21. Role of Government Government should use its power to end poverty by taking control of major resources & providing public services. Economic Decisions Many major decisions made by government. Private Property Government owns major industries; private ownership of small businesses. Major Goal A fairer distribution of income among all members of society, meet people’s basic needs. MAIN FEATURES OF SOCIALISM