UNIT 1, CHAPTER 1, SECTION 4
Economic Theories
Mr. Young
American Government
ESSENTIAL QUESTION
How
are the 3
types of
Economic
Theories
(capitalism,
socialism, and
communism)
different from
one another?
I CAN:
1.
2.
3.
List and describe the 3 major
types of Economic Theories
Explain what type of economy
the United States currently has
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 produced
2. 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 Enterprise
3. Competition
4. Freedom of Choice
5. 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


1.
2.
3.
3 main goals:
Distribution of wealth
and economic opportunity
equally among people
Society’s control, through
its government, of all
major decisions about
production
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 Economydecisions made at upper
levels of government and
handed down to managers
THE CULTIVATION OF COTTON BY VOLKOV