ECO365 Week 3 Prof Comments

ECO365 Week 3 Prof Comments - ECO365 Week 3 Professor...

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ECO365 Week 3 Professor Comments This additional lecture will cover the most important concepts to take away from week 3. These concepts are: capitalism and socialism, profit maximization, perfect competition, monopoly, and oligopoly. First capitalism and socialism. Capitalism is an economic system based on market forces and the means of production (land/capital) are owned by individuals. Thus, the market decides how, what, and for whom to produce. Socialism is an economic system based on government ownership of the means of production. Thus, government (via central planning) decides how, what, and for whom to produce. There is little if any reliance on the free market. Socialism is also referred to as a command system. In the real world, all economies have mixed economic systems which are neither complete capitalist nor socialist. Thus, economists analyze the extent an economy is more market or command based. For example, the US economy heavily favors the market while Cuba relies on a socialist model. Socialism as a widely accepted economic system collapsed with the fall of the Soviet Union, although many economies still have a general belief in heavy government involvement in economic activity.
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