Capitalism is an economic system where private individuals and businesses own production and operate for profit with little government involvement. Socialism is a system where the people collectively own property and businesses through government control and ownership, and pay higher taxes for more public benefits. A mixed economy combines elements of capitalism and socialism with both private and state-run enterprises like the US postal service. Communism is a form of socialism with complete government control and no class system, though it has never truly existed.

1. Economic Systems Chapter 7

2. Capitalism (Market Economy or Laissez-Faire, free enterprise) Capitalism-economic system in which the means of production are privately owned and operated for profit Businesses are privately owned Little to no government involvement Supply and demand determine prices

3. Capitalism continued Example: If you own a shoe store, you determine the price of your shoes based on the cost to you and how much people are willing to pay. If people are willing to pay a lot for your shoes, you make a profit, if not, you could lose your business.

4. Socialism (Planned Economy) Socialism- system in which the people as a whole rather than private individuals own all property and operate all businesses. Some government control Some businesses are privately owned, but utilities and production is owned by the government Pay more in taxes, but people receive more benefits from the government such as education, health care, etc.

5. Socialism continued Grew out of Enlightenment ideas and the focus is on the good of society Believe that capitalism creates a gap between the rich and the poor Many European countries have a socialist economic system

6. Mixed Economy Mixed economy- economic system with both private and state-run enterprises A “mix” between capitalism and socialism Some say the US really has a mixed economy since our government does own some businesses Example: post office, city of Wichita (water)

7. Communism (command economy) Communism- form of socialism in which there is no class system and all businesses are controlled by the government Complete government control of businesses Also, often repress people’s individual rights Never existed in it’s true form

8. Communism continued Examples Russia (not today) China Usually referred to as a “one-party” system