Day 10Economic Choices

Part One

Objectives: At the end of this lesson you should be able to:

• State the major economic questions according to modern economists

• Define and list characteristics of capitalism, communism/socialism, fascism

• State differences between command and market economies, and what we mean by a mixed economy

• Define monopoly and give its characteristics

Economic Questions

• Basic Questions– What should we make?– How much of it should we make?– Who gets it? (How high or low should the

price be?)– Who gets to make it? (Means of Production)– Should they be allowed to make a profit?

Market Economy

• Also known as pure capitalism or free market• Basic economic questions are determined by

the marketplace• The means of production are privately owned• Profit is allowed• Laissez-faire• “Invisible hand”• Government democratically elected• Characterized by competition

– Example- USA

Command Economy• Basic economic questions are determined

by the government–Usually a dictatorship, not democracy

• No competition• Government grants monopolies

–One company has control of productionOr the government has control of

production• 2 Types of Command Economies:• Fascism• Communism

FascismAllows private ownership and profit, but rigs the system to favor just a few huge corporations that act as monopolies

Examples- Nazi Germany, Imperial JapanCommunism

Government owns all means of production and no profit allowed

Examples- North Korea, former USSR, China (until recently)Socialism is a special case, a command economy in which government is democratically electedExamples- Sweden, Finland

Mixed Economy

• Has elements of both market and command

• What most nations follow in 21st Century

• Really no pure market or command economies among successful countries

ChallengeOn a sheet of paper, draw a horizontal line like the one shown below. Next,

write where each economic system and which type of governmentwould fall under each system. Also, try to think of an example for each. Note

Left wing and Right wing extremes.

Command Mixed Market Mixed Command

Your choices for economics systems are:communism/ socialismpure capitalismfascism

Your choices for governmental systems are:dictatorship ordemocracy

Economic Spectrum

Command Mixed Market Mixed Command

Communism/Socialism

Pure Capitalism Fascism

Dictatorship DemocracyDictatorship

What’s missing from the market economy of America at the turn

of the century?• Competition!!!!!

• Why is there no competition?– Monopolies

• How are monopolies being acquired?– Vertical and Horizontal Integration

Prelude to Wall Street

Is he right?

• Gordon Gecko is a fictitious character who used his wealth and power to merge his company with others.

• Where would he fall of the economic spectrum?

• Which philosophy is he following: Gospel of Wealth or Social Darwinism?

Carnegie and Vertical Integration…

Rockefeller and Horizontal Integration…

We’ll explore this further in Part Two.

Both lead to monopolies!