1. Capitalism By 1750, British society moved further away from regulation of trade toward the free market of capitalism Capitalism = system of production, distribution and exchange in which accumulated wealth is invested by private owners for the sake of gain

2. Example Wealthy landlords decide to raise sheep instead of crops because wool is profitable They are not concerned with the common good (or need of the people), they want to make $$ They own the sheep and choose to whom they will sell the wool and how much they will sell it for If there is more demand for the wool, they could charge a higher price If no one wants to buy the wool, they would probably lower the price

3. Capitalist systems are defined by – Free competition – Open market – Private ownership – Private businesses competing for profit – Workers are generally paid wages and are free to compete for jobs Control over the economy lies with the private, rather than governmental sector – Pure capitalism implies no governmental control

4. Adam Smith 16 th century Scottish economist – Wrote “Wealth of Nations” – Believed that governments should keep their “hands off” the economy “laissez-faire” – Believed that when the market (production and consumption) are free to respond to the laws of supply and demand, economies will be more productive – Considered the father of modern economics