The Industrial Revolution
Kirby-CHS
Lesson Seven : Economic Systems
*
WE WILL BE USING CORNELL NOTE
TAKING FORMAT TODAY!
Don’t be a victim…..
Own the day!
Relax and enjoy the ride
In History Class!
UNIT LEARNING OBJECTIVES:
North Clackamas School District Social
Studies Priority Standards:

HK 2. Analyze the complexity and
investigate causes and effects of significant
events in World History.
LESSON SEVEN: DAILY LEARNING TARGET
I Can…. Describe The Three basic Economic
Systems
Markets are places where people can
exchange the things they have for the
things they want.
Adam Smith was the first economist.
In his book, The Wealth Nations (1776),
Adam Smith explained how free markets
functioned.
The Free Market
• In a free market economy, people are free
to buy and sell whatever they want.
• Obviously, we do not live in a completely
free market economy.
• There are some restrictions on what we
can buy and sell.
In the United States today, there are some
products that we cannot legally buy. We
can buy a rifle but not this gun.
Laissez-faire
• Laissez-faire is the doctrine that states
that the government should not intervene
in the marketplace.
• It means “let them do (as they please)”.
• In a free market, the government does not
regulate the economy.
Specialization Use of Money
which makes
workers more
efficient
An economic system that permits the conduct of business
with minimal government intervention is called free
enterprise. The degree of government involvement in the
economy varies among nations.
Levels of development vary greatly among nations.
High income economies
[Per Capita GDP $9,386 +
Middle income economies
[Per Cap. GDP $765-$9,386
Low income economies
[Per Cap. GDP-below $764
No data available
1. Hong Kong
3. Ireland
5. United States
20. Belgium
31. Spain
48. France
101. Brazil
126. China
146. Russia
148. Venezuela
156. Cuba
179. North Korea
• Economic activity is based on ritual, habit and custom.
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Everyone knows their role.
Little uncertainty over what to produce or how to produce.
The question of For Whom to produce is answered by custom.
Life is generally stable, predictable, and continuous.
• Tends to discourage new ideas.
• Lack of progress leads to lower standard
of living.
• Change direction drastically in a relatively
short time (The USSR went from an agrarian
to industrial nation in a very short time).
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Not designed to meet the wants and needs of individuals.
Lack of incentives to work hard leads to unexpected results.
Large bureaucracy for economic planning.
Not flexible in dealing with minor day to day problems.
People with new or unique ideas are stifled.
The
Invisible
Hand
Specialization
The Wealth of Nations
1776
• People and firms act in their own best interest
to answer economic questions.
• Markets allow buyers and sellers to come together
in order to exchange goods and services.
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Markets can adjust over time.
Freedom exists for everyone involved.
Relatively small degree of governmental influence.
Decision making is decentralized.
Variety of goods and services are produced.
High degree of consumer satisfaction.
• The primary weakness is deciding for whom to
produce.
• The young, sick and old would have difficulty in
a pure market environment.
• Markets sometimes fail.
– Competition
(monopolies may develop)
– Resource mobility
(resources are sometimes hindered from moving about)
– Availability of information
(producers often have more information than do
consumers, which gives them an advantage)