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CHAPTER REVIEW THE ECONOMY: HISTORICAL OVERVIEW The economy is the social institution that organizes a society's production, distribution, and consumption of goods and services . Goods are commodities that range from basic necessities to luxury items. Services include various activities that benefit others. The Agricultural Revolution The harnessing of animals to plows some five thousand years ago produced revolutionary change. The four factors of agricultural technology, productive specialization, permanent settlements , and trade have been important in the development of economy. The Industrial Revolution Five revolutionary changes resulted in the Industrial Revolution of Europe: new sources of energy, the centralization of work in factories, manufacturing and mass production, specialization , and wage labor . Greater productivity steadily raised the standard of living. The Information Revolution and the Postindustrial Society By 1950, further changes created the postindustrial society , a productive system based on service work and high technology . A critical part of the postindustrial economy is the Information Revolution. The Information Revolution unleashed three key changes: 1. from tangible products to ideas 2. from mechanical skills to literacy skills 3. from factories to almost anywhere Sectors of the Economy The primary sector is the part of the economy that draws raw materials from the natural environment . The secondary sector is the part of the economy that transforms raw materials into manufactured goods . The tertiary sector is the part of the economy that involves services rather than goods . About 72 percent of our labor force is employed in such work today. The Global Economy The global economy is expanding economic activity with little regard for national borders. ECONOMIC SYSTEMS: PATHS TO JUSTICE Capitalism Capitalism refers to an economic system in which natural resources and the means of producing goods and services are privately owned . This system has three distinctive features: private ownership of property, pursuit of personal profit, and free competition and consumer choice . Socialism Socialism is an economic system in which natural resources and the means of producing goods and services are collectively owned . Its distinguishing characteristics include: collective ownership of property,pursuit of collective goals , and government control of the economy . The extent of socialism in the word has declined in recent years.
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Welfare Capitalism and State Capitalism Several western European democracies have introduced socialist policies through elections. Welfare capitalism is an economic and political system that combines a mostly market-based economy with extensive social welfare programs . These societies have high taxes and less extremes of social inequality.
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