Understanding Economic Systems

Understanding Economic Systems Communism, Socialism, Capitalism Warm Up Question #1 What standard of living do you hope to attain in life? How do you plan to accomplish this goal? Main Idea Economies vary when it comes to government involvement. The relationship between government and the economy has been debated since America’s historical beginnings. Essential Question I. Understanding Economic Systems A. Economics – the social science that analyzes the production, distribution, and consumption of goods and services. B. Many different economic systems in the world C. Helps formulate our understanding of Modern American History Economies of the World - 2008 According to this map, which are amongst the world’s wealthiest nations? II. Economic Systems Capitalism A. An economic system in which factories, equipment, or other means of production are privately owned rather than controlled by the government. B. Example – United State of America Capitalism (continued) Laissez-Faire A. The idea that the free market, through supply and demand, will regulate itself if government does not interfere B. Government should be “hands off” with big business C. Highest form of capitalism D. Ex. Rise of Industry in America in 19th Century John D. Rockefeller founder of Standard Oil had a net worth of $668 Billion Capitalism (continued) Supply & Demand A. The way a market regulates itself in a capitalist society B. In your Social Studies Journal add the following visualization. C. So how does this work? Socialism A. A political and economic theory that advocates ownership of the means of production, such as factories and farms, by the people rather than by capitalists and land owners. B. Power belongs to the working class C. Ex – China, Yugoslavia (parts of U.S.S.R.) The symbol of the Soviet Union featured the hammer and sickle symbols of laborers for centuries Communism A. An economic or political system in which the state or the community owns all property and the means of production, and all citizens share the wealth. B. Creates a classless society (theoretically C. Ex – Vietnam, Cuba, U.S.S.R. Capitalism (Market economy) Ownership and control Competition Standard of Living •Individuals control means of production •Market determines what goods will be sold at what price •Competition keeps prices low and quality high •high standard of living and economic security •Individuals free to earn profits, but may risk losses Socialism (mixed economy) •Basic means of production owned and managed by government •Private ownership, with regulation, of businesses Cooperation stressed over competition Communism (Command economy) Government owns means of production Government determines what goods will be sold at what price No competition, lower quality goods •high standard of living Goal is equality for and economic security everybody, enforced by •High taxes provide the government free health care and education Economic Scenarios Work with your table groups to demonstrate your understanding of economies. Analyze the following scenarios and then identify the type of economy that is being described in the statement. Scenario #1 In this economy manufactures of automobiles control the number of vehicles produced each month in a effort to avoid surpluses that would minimize their profits. Scenario #2 In this economy, the government produces it’s signature crab flavored soft drink and determines that it will be sold for $1.25 in all stores. Scenario #3 In this economy, investors can make millions investing in the construction of new homes, but it is just as likely that the value of these properties could decrease by 40% and they will lose millions of dollars. Scenario #4 In this economy, unemployment is around 3% and although taxes are high, all members of the society have access to good schools and hospitals. Scenario #5 In this economy, there are only 3 types of automobiles to choose from. They often break down and they are all painted a light brown color. Scenario #6 In this economy, you are the owner of construction company, but all your materials to build houses is regulated by the government to ensure safe housing for all. Scenario #7 In this economy, the value of goods fluctuates greatly and as a company you must continue to produce quality goods, or risk being out of business. Creating a Visual Reminder – Supply & Demand These concepts are complex, yet understanding them is essential to our discourse this year. Supply $ Price $ Supply $ Price $ Demand $ Price $ Demand $ Price $ With the time remaining in class, I am asking you to create a visual reminder, with your table group for supply & demand. America’s Mixed Economy • Work with your table group to read the article about America’s current mixed economy. • Respond to the essential questions after reading • Class discussion to follow