ECON 2000 1st Edition Lecture 4Outline of Last Lecture XII. Class experimentA. text vs. Push upsB. Production Possibility FrontierOutline of Current Lecture XIII. Economic Systemsa. Pure Capitalismb. Pure SocialismXIV. Classification Criteriaa. Which economic player owns the factors of production (economic resources)?b. Which economic player makes the primary decision when it comes to answering the three fundamental questions of economicsc. What mechanism is used to implement these decisions? (How are decisions carried out)XV. Classifyinga. Pure Capitalismb. Pure Command SocialismXVI. Characteristicsa. Pure Capitalismb. Pure Command SocialismXVII. Pure Capitalism Strengths and weaknessesa. Strengthsb. WeaknessesXVIII. Pure command socialism strengths and weaknesses a. Strengthsb. WeaknessesCurrent LectureXIII. Economic Systemsa. Pure CapitalismThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.b. Pure Socialismi. There is no such thing as a PURE capitalism or socialism on Earth because they are all mixed systemsXIV. Classification Criteriaa. Which economic player owns the factors of production (economic resources)?b. Which economic player makes the primary decision when it comes to answering the three fundamental questions of economicsi. What to produceii. How to produceiii. For whom to produce forc. What mechanism is used to implement these decisions? (How are decisions carried out)XV. Classifyinga. Pure Capitalismi. INDIVIDUALS own the economic resourcesii. INDIVIDUALS choose what to produceiii. FIRMS answer how to produceiv. INDIVUDALS with money choose for whom to produce forv. Uses market mechanism1. Any transaction between buyers and sellers is referred to as marketb. Pure Command Socialismi. PUBLIC (government) owns the economic resourcesii. GOVT deices what, how, and for whom to produce foriii. Commands and directives by the GOVERNMENT tell how it should be carried outXVI. Characteristicsa. Pure Capitalismi. Private property and freedom of choiceii. Self-interestiii. Markets & prices1. Prices signal markets to take out inefficienciesiv. Competitionv. Limited Governmental Interventionb. Pure Command Socialismi. Public Ownershipii. Centralized decision-makingiii. Economic planningiv. Allocation by commandXVII. Pure Capitalism Strengths and weaknessesa. Strengthsi. Economic Efficiency1. Producing the products that consumers want and in the least costly wayii. Economic Freedom1. People are free to choose based on self interestiii. Political Freedom1. Separations of Government with Economicsiv. Competition leads to quality productsb. Weaknessesi. Inflationii. Everyone is not equal1. Large wealth gapiii. Monopolies can begin to block markets1. Not in a traditional ideal pure capitalismiv. Money can buy political power and freedomv. Pursuit of self-interest over social interestvi. Promotes going bigger and better1. Inflicts with scarcity2. Environmental harmvii. Corporations may act more in self-interest, not caring about consumers1. Exploitation of labor for profitXVIII. Pure command socialism strengths and weaknesses a. Strengthsi. Equal distribution of wealth and goods1. No one is left behind while others exceed wealth standardsii. Only products needed are produced1. Save resourcesiii. Provides a minimum standard of livingiv. Promotes social interest over self interestv. Economic planning1. Government has a long term visionvi. Equality of opportunity1. On needs: health care/ housingvii. Lower unemployment ratesb. Weaknessesi. Little to no incentive to create quality goods or create new servicesii. No freedom of choice and little varietyiii. Consumer demands are not met, only basic needsiv. No specialization and division of laborv. Lack of efficiencyvi. Subsidies on goods and services quickly lead to shortagesvii. Corrupt central authority has direct connections to all goods and servicesviii. Economic planning leads to surpluses and shortages due to lack of efficiencyStrengths of Pure CapitalismWeaknesses of Pure CapitalismStrengths of Pure Command SocialismWeaknesses of Pure Command SocialismEconomic Efficiency: Producing the products that consumers want and in the least costly wayInflation Equal distribution of wealth and Goods. No oneis left behind while others exceed wealth standardsLittle to no incentive to create quality goods or create new servicesEconomic Freedom: People are free to choose based on self interestEveryone is not equal: LARGE WEALTH GAPOnly Products needed are produced, saving resourcesNo freedom of choice and little varietyPolitical freedom: Separations of Government with EconomicsMonopolies can begin to block market (not in a traditional Ideal Pure Capitalism)Provides a minimum standard of livingConsumer demands are not met, only their basic needs areCompetition leads to Quality productsMoney can buy political power and freedomPromotion Social interest over self interestNo specialization and division of laborPursuit of Self Interest over Social InterestEconomic planning: government has a long term visionLack of efficiencyPromotes going bigger andbetter which may inflict with scarcity and lead to environmental harmEquality of opportunity(needs, health care, housing)Subsidies on goods and services quickly lead to shortages. Corporations may act more in self-interest, not caring about consumers. - Exploitation of labor- Unsafe productsLower unemployment Corrupt central authority has direct connections to all goods and servicesEconomic planning leads to surpluses and shortagesdue to lack of