The U.S. Economy in Historical Perspective - The U.S economy is a market economy which is an economic system based on private Property and the markets in which, in principle, individuals decide how, what, and for Whom to produce. - Markets work through a system of rewards and payments. - Individuals are free to do whatever they want if it is legal - Fluctuations in prices play a central role in coordinating individuals’ wants In a market economy Capitalism and Socialism - Capitalism is an economic system based on the market in which the ownership of the Means of production resides with a small group of individuals. - Socialism is an economic system based on individuals’ goodwill towards others, not On their own self-interest, and in which, in principle, society decides what, how, and For whom to produce - Socialism - Is where all people contribute what they can and get what they need - Is based on government ownership of the means of production with economic Activity governed by central planning. - China and Venezuela are often identified as socialistic in the news Evolving Economic Systems - Feudalism is an economic system based on tradition and dominated the western world from The 8th to the 15th century - Mercantilism is an economic system in which the government controls economic activity By doing out the rights to undertake economic activities and was dominant until the 18th Century - During the industrial revolution, technology and machines rapidly modernized industrial production