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
• Ignores production of public
Freedom
goods, produces private goods
Highly decentralized
and services
Role of economy in government • Only produce for those who
much smaller
have demand
• Consumer satisfaction
• Ignores the poor, unemployed,
• Flexibility to accommodate
and less productive members of
change
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 lost
2. Lacks effective incentives that
encourage people to work
hard
3. Fails to meet the needs and
wants of consumers
4. Inefficiency of centralized
planning