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Two Poles in Economic Systems

• At one extreme, production is carried in a private-enterprise system such that all resources are privately owned. It was described by Adam Smith as frequentlypromoting a social interest, although only a private interest was intended. (Invisible Hand Theory)
At the other extreme, following Karl Marx and Vladimir Lenin is what is commonly called apure-communist system, such that all resources are publicly owned with an intent of minimizing inequalities of wealth among other social objectives.

Types of Economic Systems

Pure capitalism / marketeconomy
– A system with private ownership of resources and the use of prices to coordinate economic activity in free, competitive markets
Command economy / planned economy /socialist
– A system withcentralized economic planning and public ownership of resources
Mixed economy

• A market economy is normally based on asystem of capitalism, where private citizens own the factors of production.
• Another characteristic is free enterprise where competition is allowed
with almost no government interference.Characteristics of Free Enterprise and Capitalism
• Economic Freedom: people choose their jobs, employers and how to spend. Businesses choose what to sell and how much to charge.
• Voluntary Exchange:buyers and sellers may engage freely in market transactions.
• Profit Motive: people improve their material well-being by making money.
• Private property rights: people may control their possessions asthey wish.
Competition: producers and sellers compete to attract by lowering costs and consumers compete to get more for less.

The Role of Government
– Enforces laws, defendsindividual freedoms, protects property rights...
– Education, public welfare, defense services, parks, libraries, transportation...
– Preserves competition in the...