Economic Theories

1. Comparing Economic
Systems

2. Economics is the study of
…?

3. • How a country chooses to satisfy its’
unlimited wants and needs with its’ limited
resources

4. Resources
• Food
• Energy
• Labor
• Raw Materials
• Services

5. An economic system is
• The system or way a country chooses to
use and distribute…(see above slide)
• Capitalism
• Socialism
• Communism

6. Capitalism
• An economic system based on private
ownership of productive property
(farmers fields, gold, natural resources)
U.S., Germany and Japan

7. Four Factors of Production
• Land – resources
• Labor - work
• Management (MGMT) – organize and
decide
• Capital - $ and machinery

8. Pizza Shop
• Land

9. Pizza Shop
• labor

10. Pizza Shop
• Management

11. Pizza Shop
• Capital

12. Capitalist
• Has capital and puts it to productive use

13. • Another name for a capitalist economy
• Free-Enterprise system

14. • People are free to start and run
businesses
• Five characteristics of a free enterprise
system

15. • private ownership
– individuals or groups own most of the means
of production

16. • guarantee of property rights
– right to own property

17. • private decision makers
– decisions of what to produce left individuals
and companies
– decisions of how to produce left individuals
and companies

18. • competition
– businesses compete with one another
– law of supply and demand

19. • freedom of choice
– consumers can choose from many products
and services

20. • Does the United States really a capitalist
economy?
• Are we really free to do whatever we want
with our productive property?

21. Mixed Economy
• Why is the U.S. called, a mixed
economy?
• Private business and the government play
a part in the economic system
• Regulation of business – cars – seatbelts
• Government runs business
• Government grants license or utility –
PECO, Comcast, Pa American Water
Company

22. Sole proprietorship

23. Partnership

24. Corporation

25. • 80% of U.S. business are small
businesses

26. Time for the Quiz

27. AP Government Chapter 1 Text
Question
• James Madison, wrote” If men were
angels, no government would be
necessary. If angels were to govern men,
neither external or internal controls on
government would be necessary.” Explain
what this quote means and what kind of
controls Madison put into the Constitution
a a consequence of his beliefs.