Capitalism

• The underlying theme of capitalism is the use

of wealth to create more wealth. In the case
of a single owner of an industrial enterprise
(such as a factory), the system reveals a
characteristic distinction. All the profits go to
one man, though many others share the work.
Full-scale capitalism results in an inevitable
divide between employer and employed, or
capital and labor.

What is Capitalism?

• Capitalism – economic

system in which
production, distribution,
and exchange of wealth is
privately owned with the
goal of making profit in a
market economy.

• Competition - rivalry in

supplying or acquiring an
economic service or good

Capitalism

• market economy - an economy in

which decisions regarding
investment , production and
distribution are based on supply
and demand

• prices of goods and services are

determined in a free price system

**The great thing about the free
market system is that prices and
quantities tend to move toward
equilibrium and, for the most part,
keep the market stable.

Market Economy

• supply and demand is an

economic model of price
determination in a market.

• in a competitive market, the

unit price for a particular good
will vary until it settles at a
point where the quantity
demanded by consumers will
equal the quantity supplied by
producers (equilibrium)

Supply and Demand

• If demand increases and supply remains unchanged, a

shortage occurs, leading to a higher equilibrium price.

• If demand decreases and supply remains unchanged, a

surplus occurs, leading to a lower equilibrium price.

• If demand remains unchanged and supply increases, a

surplus occurs, leading to a lower equilibrium price.

• If demand remains unchanged and supply decreases, a

shortage occurs, leading to a higher equilibrium price.

Laws of Supply and Demand

What pattern can you see?

Surplus = lower price
Shortage = higher price

• In the early 1800s the middle-class owners of

railroads, factories, and mines began
supporting laissez-faire. They believed that
freedom from government controls would
mean a growing economy with material
progress for all people.

Laissez-Faire Economics

Remember

him?!

• Profit making without profit

sharing – seed of discontent
planted among lower class
(low wages) because factory
owner were so greedy

• This also plays into supply

and demand of workers and
employees which is very
apparent today

Low Wages and Unhappy People