Chapter 2 Economic Systems

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					Chapter 2
Economic Systems
 Economic System
 Capitalism- Factors of Production
  privately owned
     Less govt. intervention
     Free market economy
     Profit incentive
     Competition
     Laissez-faire = “Let it Be”
 Command Economy
   No private ownership of FOP
   Govt. makes economic decisions (allocation
    of resources)
   Emphasis on economic equality
   Based on Marxism
 Mixed Economies
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
Increased Productivity

  Assembly Line
    Division of Labor
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
Section C: The Role of
Profits
  Profits
    =Incentives (reason)
       Hardwork
       Innovation/Invention
       Efficiency
    determines allocation of resources
       Profitable firms get the resources
          Creates efficiency / Innovation
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

				
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