CAPITALISM!

“No other economic system in the history of the world has been as successful”

-Civics Textbook copyright 2008

What is Capitalism?

An economic system in which private citizens own and use the factors of production in order to seek a profit.

Based on free markets and private ownership

Not to be confused with “FREE ENTERPRISE”

This is simply another adjective used to describe the American Economy.

Competition is allowed to flourish with a MINIMUM OF GOVERNMENT INTERFERENCE

We operate under both headings; our economic system is

known as:

FREE MARKET CAPITALISM

What makes Capitalism Work?

• Markets• Economic Freedom• Private Property Rights• Competition• Profit Motive• Voluntary Exchange

MARKETS

• Local, regional, national or global• They connect different sectors of the

economy• Chart of 522 – the one from the essay….– The Business Sector and Consumer Sector are

connected through Factor Markets and Product Markets…

• Consumer Sovereignty– The consumers decide what the businesses are

producing

Economic Freedom

FACTOR MARKET - We get to choose what type of job to have…, and we can choose when and where we would like to work.

PRODUCT MARKET - Consumers have the Right to choose the products we buy. Businesses have the right to produce whatever they want

Comes with Consequences……

Private Property Rights

FACT: We can keep whatever we earnFACT: We have the right to own our own

property (“stuff”)FACT: People take care of things better when

they OWN them…

RESULT: People work hard so they can get more “stuff” to own.

Competition

• The struggle between buyers and sellers to get the best products at the lowest prices

• Competition btw sellers drives prices down• Buyers compete to find the best “deals”

Competition

• Competition rewards the most efficient producers

• Competition punishes the least efficient producers

• The result of competition in Capitalism is:– Efficient production, high quality products, more

satisfied customers

Profit Motive

• People are free to risk their savings or any part of their wealth in a business venture

• Could go either way….

• Profit Motive is the driving force that encourages individuals to improve their material well being…– They are trying to “make a profit”

Voluntary Exchange

• The act of buyers and sellers freely and willingly engaging in market transactions

• Both parties feel like they are getting a good deal…engaging in a beneficial exchange….a win-win situation…

Laissez-faire Economics

French for “to let alone”The founding principle of Capitalism