Capitalism Key Words Adam Smith Business Law of

Capitalism Key Words Adam Smith Business Law of Supply and Demand Law of Competition Law of Self-Interest Entrepreneurs Free Enterprise Private Ownership Profit Market Economy Monopoly

Capitalism: Who supplies? Groceries Medical care Housing Cars Leisure/luxury items Utilities—gas/electricity Entertainment Clothing Aid to poor Technology Information/news Insurance

Capitalism is § An economic system that depends on private ownership (by individuals or companies made up of individuals) of businesses. Businesses produce goods and services by investing capital in machines or technology. § Businesses (producers) depend on consumers to earn profits.

Capitalists—entrepreneurs who became millionaires as a result of their business ventures, and sometimes their unfair business practices Examples— 19 th c U. S. § § § § Andrew Carnegie John D. Rockefeller Cornelius Vanderbilt Joseph Pulitzer Wm. R. Hearst JP Morgan Henry Ford

Law of Supply and Demand Enough goods will be produced at the lowest possible price to meet demand in a market economy. Price is determined by both supply and demand.

Law of Competition If two or more businesses are selling a product (competition), the price goes down. Competition is good for consumers. When only one business sells a product, it is called a MONOPOLY.

Law of Self-Interest People will do whatever is in their own interest. People work for their own good. • Business owners—motivated by profit • Consumers—motivated by low prices, high quality • Workers—motivated by higher wages, good working conditions

Laissez Faire § “Let it be” § Government should not get involved in business or regulate it. § Instead, business should be controlled by a MARKET ECONOMY, following the natural laws of economics (explained by Adam Smith in Wealth of Nations) § Capitalists believe this is better for everyone.

Why does Laissez Faire capitalism work? § Free enterprise—everyone has the opportunity to do the best for himself/herself, § Going into business selling a product that consumers want to buy § Looking for a better job § Buying a better quality product § Finding the same product at a lower price

Problems with capitalism:

Who benefits? § Capitalism is good for. . . § Capitalism can be a problem for. . .