What is an Economic System - Mrs. Oliver's World History



What is an Economic System?

|Background: |Abuses of Industrial Revolution: |Four Basic Economic Questions: |

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|1. Global trade increase due to Columbian Exchange &|1. Unequal distribution of wealth |What to produce? |

|Industrial Revolution | | |

| | |How to produce it? |

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| |2. Long Hours |How much to produce? |

|2. Gap between rich and poor widens | | |

| | |How to distribute? |

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| | |Define: |

|3. Business leaders want governments to stay out of |3. Unsafe working conditions |Economic System: has to do with jobs, money, |

|economic affairs. | |products, and services. What kind of economic system|

| | |a country has depends on who make the decisions |

| | |about jobs, money, products, and services |

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| | |Traditional: relies on habit, ritual, & the family. |

|4. Reformers believe governments should improve | | |

|conditions for the poor. |4. No worker’s Compensation | |

| | |Market: individuals own the factors of production. |

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| | |Command: Government owns the factors of production. |

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| | |Mixed: a mixture of 2 or 3 of the above types = the |

| | |“isms” |

| | |Capitalism, Communism, Socialism |

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|Socialism: Definition |Capitalism: Definition |Communism: Definition |

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|An economic system in which the factors of |An economic system based on individuals own the |An economic system based on all major industry and |

|production are owned by the public. All major |factors of production and all major industries. |factors of production are owned by the government. |

|industries owned by government. |Private property, profit motive |Private property DOES NOT exist, and all goods and |

| | |services are shared equally. |

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|Socialism: |Capitalism: |Communism: |

|When: Post Industrial Era |When: During the Age of Exploration |When: Begins in 1800 |

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|Reason: Some people blamed the problems of the |Reason: Began as result of the Columbian Exchange |Reason: The reforms of the Industrial Revolution |

|Industrial Revolution on Capitalism. | |sparked Karl Marx to evaluate the inequalities that |

| | |were going on. |

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|Who: Ideas from Charles Fourier & Saint-Simone |Who: Adam Smith – first to describe the basic ideas | |

|(French Reformers) |in Wealth of Nations | |

| | |Who: Karl Marx – The Communist Manifesto |

| |Basic Ideas: | |

|Basic Ideas: |Law of supply and demand-real price is set by |Basic Ideas: |

|All major means of production are owned by the |consumers. |All factors of production owned by the people |

|government and run for the good of the people. |Individuals own the factors of production |No private property |

|Small businesses can be privately owned but major |Law of Competition-to sell you must reduce price or |All goods and services are shared by the people |

|businesses are owned by the government |raise quality when there is competition. |Extreme government regulations. |

| |Laissez-faire Capitalism-“hands off” or let the | |

| |people do as they choose. | |

| |Private ownership of property, industry, and | |

| |business. People not the government answer the four | |

|Type: Mixed Economy |basic economic questions. | |

| |No/few government regulations. | |

|Modern Examples: | | |

| |Type: Market Economy (Mixed) |Type: Command Economy |

|France and Canada | | |

| |Modern Examples: |Modern Examples: |

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| |USA and Japan |China and North Korea |

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|Positive: |Positive: |Positive: |

|Free medical care |Can choose your own doctor. |No unemployment, guaranteed a job |

|Low prices for products |Can own a business. |House is provided for you |

|All Leaders are subject to recall |Various selection of products | |

|All leaders paid an average workers wage. | |Negative: |

|Negative: |Negative: |No incentive to work hard to improve profit |

|Cannot pick your own doctor. |Health care is expensive. |Do not get to choose where you live |

|Very few choices of products. |Assume all risk if business is unsuccessfully. | |

| |Can go into debt. | |

| |Higher cost for products | |

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