CHAPTER 18: SECTION 1 Amy De la Cruz Lizbeth Morales Luis Munoz Ruby Perez.
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Transcript of CHAPTER 18: SECTION 1 Amy De la Cruz Lizbeth Morales Luis Munoz Ruby Perez.
CHAPTER 18: SECTION 1
Amy De la Cruz
Lizbeth Morales
Luis Munoz
Ruby Perez
In the 1900’s, the world’s developed nations fell into 3 categories of economic systems-communism, socialism and capitalism.
CAPITALISM• Capitalism: the means of production are privately owned
• Ex: Germany, United States, India, & Japan
Advantages Disadvantages
• Efficiency• Freedom• Highly decentralized• Role of economy in
government much smaller• Consumer satisfaction• Flexibility to accommodate
change
• Ignores production of public goods, produces private goods and services
• Only produce for those who have demand
• Ignores the poor, unemployed, and less productive members of society
SOCIALISM• Socialism: an economic system in which government owns and
runs some of the basic productive resources in order to distribute output in ways deemed to be in the best interest of society.
• Ex: Finland, Canada, Ireland, & Belgium
Advantages Disadvantages
Those who are not fortunate or productive enough to earn a competitive income still share the benefits of society
If workers receive government guarantees of jobs, more workers will be hired than are necessary, driving up the cost of production. Government provides broader ranges of services taxes are generally higher in socialist countries.
COMMUNISM• Communism: a political and an economic framework where all property is
collectively owned, labor is organized for the common advantage of the community, and everyone consumes according to their needs.
• Ex: Cuba, North Korea, and the former Soviet Union
Characteristics Disadvantages
1. Central planning authority 2. Movement of resources,
particularly labor, is strictly controlled
3. The central planning authority makes all decisions
4. Individual risk-taking is strictly forbidden
1. Individual freedom is lost2. Lacks effective incentives that
encourage people to work hard
3. Fails to meet the needs and wants of consumers
4. Inefficiency of centralized planning