Notes Ch 1 Sec 3 Remember Three Key Economic Questions What to make? How to make it? Who consumes these goods and services?
Adam Smith <ul><li>Book ~ The Wealth of Nations Published in 1776. Identifies land, labor, and capital as the factors of p...
Laissez Faire ( Let them do) <ul><li>Adam Smith called for restricting the role of the government in the economy.  </li></...
The Invisible Hand and Self-Interest <ul><li>Businesses could provide what people needed without help of the central plan ...
How is a Centrally Planned Economy Organized? <ul><li>Centrally planned economics operates in direct contrast to free mark...
3 Basic Economic Questions <ul><li>A central bureaucracy makes all the decisions about…. </li></ul><ul><li>What to make. <...
Government Control of Factor Resources and Production <ul><li>Centrally planned economy ~ Government owns both land and ca...
Socialism and Communism <ul><li>Often associated with centrally planned.  </li></ul><ul><li>Socialism  a social and politi...
Socialism <ul><li>Socialism is a social and political philosophy based on the belief that democratic means should be used ...
Socialism cont. <ul><li>Socialist countries the government often owns major industries.  </li></ul><ul><li>Socialism exist...
Communism <ul><li>Communism is a political system that that arose out of the philosophy of socialism. </li></ul><ul><li>Is...
Communism Cont. <ul><li>Communist governments are authoritarian.  </li></ul><ul><li>Strict obedience from their citizens a...
Karl Marx and Friedrich Engels <ul><li>Introduced their socialist philosophy in the Communist Manifesto in 1848.  </li></u...
Adam Smith ~ Karl Marx <ul><li>Adam Smith </li></ul><ul><li>Invisible Hand </li></ul><ul><li>Competition </li></ul><ul><li...
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Notes ch 1 sec 3

  1. 1. Notes Ch 1 Sec 3 Remember Three Key Economic Questions What to make? How to make it? Who consumes these goods and services?
  2. 2. Adam Smith <ul><li>Book ~ The Wealth of Nations Published in 1776. Identifies land, labor, and capital as the factors of production that generate a nation’s wealth. Work divided into steps and workers specialize in one step then the productivity increase. Higher productivity increases the overall wealth of the nation. </li></ul>
  3. 3. Laissez Faire ( Let them do) <ul><li>Adam Smith called for restricting the role of the government in the economy. </li></ul><ul><li>Leave individuals as free as possible to pursue their own interests if the market economy is to run smoothly. </li></ul><ul><li>If left alone people will try to better themselves and produce. </li></ul>
  4. 4. The Invisible Hand and Self-Interest <ul><li>Businesses could provide what people needed without help of the central plan telling them what to do. </li></ul><ul><li>The invisible hand guides a nation’s resources to their most productive use. Self interest, individuals, each pursuing what is best for him or her, make decisions that benefit the nation. </li></ul>
  5. 5. How is a Centrally Planned Economy Organized? <ul><li>Centrally planned economics operates in direct contrast to free market system. </li></ul><ul><li>Centrally planned economics results in inefficient economics that severely limits individual freedom. </li></ul><ul><li>In a Centrally planed economy, the central government , rather than individual producers and consumers in markets, answer the key economic questions of production and consumptions. </li></ul>
  6. 6. 3 Basic Economic Questions <ul><li>A central bureaucracy makes all the decisions about…. </li></ul><ul><li>What to make. </li></ul><ul><li>Who makes it. </li></ul><ul><li>Who gets to have it. </li></ul>
  7. 7. Government Control of Factor Resources and Production <ul><li>Centrally planned economy ~ Government owns both land and capital. Kind of owns labor too by controlling where individuals work and how much they are paid. </li></ul><ul><li>What to produce and how much to make. (not determined by consumers.) </li></ul>
  8. 8. Socialism and Communism <ul><li>Often associated with centrally planned. </li></ul><ul><li>Socialism a social and political philosophy based on the belief that democratic means should be used to evenly distribute wealth throughout a society. </li></ul><ul><li>Communism a political system characterized by a centrally planned economy with all economic and political power resting in the hands of the central government. </li></ul>
  9. 9. Socialism <ul><li>Socialism is a social and political philosophy based on the belief that democratic means should be used to distribute wealth evenly throughout a society. Must have political equality and economic equality. </li></ul><ul><li>socialist nations may be democracies, socialism requires a high degree of central planning to achieve economic equality. </li></ul>
  10. 10. Socialism cont. <ul><li>Socialist countries the government often owns major industries. </li></ul><ul><li>Socialism exist in varying degrees in different nation throughout the world. </li></ul><ul><li>Socialism ~ Democratic means should be used to distribute evenly throughout society </li></ul><ul><li>Example health care voter on socialistic. </li></ul>
  11. 11. Communism <ul><li>Communism is a political system that that arose out of the philosophy of socialism. </li></ul><ul><li>Is characterized by a centrally planned economy with all economic and political power resting in its hands of the central government. </li></ul><ul><li>Believe that a socialist society can only come about after a violent revolution. </li></ul>
  12. 12. Communism Cont. <ul><li>Communist governments are authoritarian. </li></ul><ul><li>Strict obedience from their citizens and do not allow individuals freedom of judgment and action. </li></ul>
  13. 13. Karl Marx and Friedrich Engels <ul><li>Introduced their socialist philosophy in the Communist Manifesto in 1848. </li></ul><ul><li>The term communist was adopted by the Bolsheviks who, led by Vladimir Lenin took control of Russia in 1917. </li></ul>
  14. 14. Adam Smith ~ Karl Marx <ul><li>Adam Smith </li></ul><ul><li>Invisible Hand </li></ul><ul><li>Competition </li></ul><ul><li>Self Interest by rational people </li></ul><ul><li>Karl Marx </li></ul><ul><li>people are clueless </li></ul>

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