Economic Systems

Capitalism

Socialism

Communism

Definition

A system for producing, selling, and distributing

goods and services.

Capitalism (Free Market)

Economic system in which private individuals or

groups use private capital (money)

and labor to produce goods and services.

Capitalism Features

People control economic production and output.

People decide what, where, and how to produce what consumers buy.

Owners decide how much to pay workers and use profits.

Prices are determined by supply and demand and competition.

The role of government is to support businesses with minimal government involvement.

Higher education and health care is paid for by the consumer.

Effects of Capitalism

People can own land and business.

Unequal distribution of wealth

Low unemployment rate: 3%-5%.

Favors a democratic or free government.

Creates the wealthiest nations.

Creates economic classes: poor, working poor, middle class, and rich.

Examples

USA South Africa Japan Mexico

Socialism

An economic system in which the government owns most basic industries, such as transportation, communication, and banking: non basic industries are privately owned such as restaurants, hair salons, and factories.

Socialism Characteristics/Basic Industries

Basic industries are essential for a nation to function. Ex: transportation, communication

Basic industries are ran for the good of society, not for profit.

The government decides how much to pay for goods and how much to pay workers.

Profits made from basic industry allow for nations to pay for health care and higher education.

Socialism Characteristics/Non Basic Industries

Non basic industries are nice, but not necessary. Ex: Internet Business

Non basic industries and services follow a capitalist model.

Non basic industries are privately owned and consumers decide what products to buy.

Effects of Socialism

Lessens gap between the poor and rich

Gives citizens equal availability to healthcare and education.

Welfare and insurance for unemployed are distributed.

People live comfortable lives, but have less than those living in capitalistic countries.

Examples of Socialist Countries

Socialism is the ½ point between communism and capitalism.

Spain, Portugal, Sweden, and Italy

Communism

Economic system in which the government owns all property such as farms and factories, for the benefit of the citizens.

Communism Characteristics

The government usually controls all aspects of citizens’ lives.

The government controls the price of goods and services how much is produced, and how much workers are paid.

People do not own businesses or factories, all means of production are owned by the government.

Effects of Communism

The governments of communist countries are usually violent in nature and do not support freedom.

Communism is aimed to create a classless society.

Unemployment and poverty are common.

People are not able to make their own economic decisions or to earn their own fortune.

The USA fought the Cold War to stop the spread of communism.

Examples of Communism

CubaChinaNorth Korea