Day 10
Economic Choices
Part One
Objectives: At the end of this lesson
you should be able to:
• State the major economic questions
according to modern economists
• Define and list characteristics of
capitalism, communism/socialism, fascism
• State differences between command and
market economies, and what we mean by
a mixed economy
• Define monopoly and give its
characteristics
Economic Questions
• Basic Questions
– What should we make?
– How much of it should we make?
– Who gets it? (How high or low should the
price be?)
– Who gets to make it? (Means of Production)
– Should they be allowed to make a profit?
Market Economy
• Also known as pure capitalism or free market
• Basic economic questions are determined by
the marketplace
• The means of production are privately owned
• Profit is allowed
• Laissez-faire
• “Invisible hand”
• Government democratically elected
• Characterized by competition
– Example- USA
Command Economy
• Basic economic questions are determined
by the government
–Usually a dictatorship, not democracy
• No competition
• Government grants monopolies
–One company has control of production
Or the government has control of
production
• 2 Types of Command Economies:
• Fascism
• Communism
Fascism
Allows private ownership and profit, but rigs the
system to favor just a few huge corporations
that act as monopolies
Examples- Nazi Germany, Imperial Japan
Communism
Government owns all means of production and
no profit allowed
Examples- North Korea, former USSR,
China (until recently)
Socialism is a special case, a command
economy in which government is
democratically elected
Examples- Sweden, Finland
Mixed Economy
• Has elements of both market and
command
• What most nations follow in 21st Century
• Really no pure market or command
economies among successful countries
Challenge
On a sheet of paper, draw a horizontal line like the one shown below. Next,
write where each economic system and which type of government
would fall under each system. Also, try to think of an example for each. Note
Left wing and Right wing extremes.
Command
Mixed
Market
Your choices for economics systems are:
communism/ socialism
pure capitalism
fascism
Your choices for governmental systems are:
dictatorship or
democracy
Mixed
Command
Economic Spectrum
Command
Communism/
Socialism
Dictatorship
Mixed
Market
Pure Capitalism
Democracy
Mixed
Command
Fascism
Dictatorship
What’s missing from the market
economy of America at the turn
of the century?
• Competition!!!!!
• Why is there no competition?
– Monopolies
• How are monopolies being acquired?
– Vertical and Horizontal Integration
Prelude to Wall Street
Is he right?
• Gordon Gecko is a fictitious character who
used his wealth and power to merge his
company with others.
• Where would he fall of the economic
spectrum?
• Which philosophy is he following: Gospel
of Wealth or Social Darwinism?
Carnegie and Vertical Integration…
Rockefeller and Horizontal Integration…
Both lead to monopolies!
We’ll explore this further in Part Two.