Economic Systems Chapter 7

Capitalism (Market Economy or Laissez-Faire, free enterprise)

Capitalism-economic system in which the means of production are privately owned and operated for profit Businesses are privately owned Little to no government involvement Supply and demand determine prices

Capitalism continued

Example: If you own a shoe store, you determine

the price of your shoes based on the cost to you and how much people are willing to pay. If people are willing to pay a lot for your shoes, you make a profit, if not, you could lose your business.

Socialism (Planned Economy) Socialism- system in which the people as

a whole rather than private individuals own all property and operate all businesses. Some government control Some businesses are privately owned, but

utilities and production is owned by the government

Pay more in taxes, but people receive more benefits from the government such as education, health care, etc.

Socialism continued

Grew out of Enlightenment ideas and the focus is on the good of society

Believe that capitalism creates a gap between the rich and the poor

Many European countries have a socialist economic system

Mixed Economy

Mixed economy- economic system with both private and state-run enterprises A “mix” between capitalism and

socialism Some say the US really has a mixed

economy since our government does own some businesses▪ Example: post office, city of Wichita (water)

Communism (command economy)

Communism- form of socialism in which there is no class system and all businesses are controlled by the government Complete government control of

businesses Also, often repress people’s individual

rights Never existed in it’s true form

Communism continued

Examples Russia (not today) China Usually referred to as a “one-party”

system