UNIT 1, CHAPTER 1, SECTION 4Economic Theories

Mr. Young

American Government

ESSENTIAL QUESTIONHow are the 3 types of Economic Theories (capitalism, socialism, and communism) different from one another?

I CAN:

1. List and describe the 3 major types of Economic Theories

2. Explain what type of economy the United States currently has

3. Analyze Karl Marx and his understanding of how communism works

PAGE 1: ECONOMICS Study of Human

Efforts to satisfy seemingly unlimited wants through the use of limited resources

3 Major decisions:1. What and how much

should be produced2. How goods and

services should be produced

3. Who gets the goods and services that are produced

PAGE 2: CAPITALISM An economic system

providing free choice and individual incentives for workers, investors, consumers, and business enterprises

Free market- buyers and sellers were free to make unlimited economic decisions

Adam Smith- Wealth of Nations

Laissez-Faire-government keeps its hands off economy

Mixed-Market Economy- Free enterprise combined with and supported by government decisions (USA)

5 main characteristics:

1.Private ownership and control of property and economic resources

2.Free Enterprise3.Competition4.Freedom of Choice5.Possibility of Profits

PAGE 3: SOCIALISM Government owns the

basic means of production, determines the use of resources, distributes the products and wages, and provides social services

Democratic Socalism where people have basic human rights but little control of production or ecomony

3 main goals:1. Distribution of wealth

and economic opportunity equally among people

2. Society’s control, through its government, of all major decisions about production

3. Public ownership of most land, of factories, and of other means of production

PAGE 4: COMMUNISM Central government

directs all major economic decisions; no class systems

Karl Marx- Father of Communism; “Das Kapital” and “Communist Manifesto”

Bourgeoisie- capitalists who owned the means of production

Proletariat- workers who produce the goods

Command Economy- decisions made at upper levels of government and handed down to managers

THE CULTIVATION OF COTTON BY VOLKOV