Chapter 5 Key Economic Questions Society Must Answer
A more concise One-Page Test Review of Chapter 5 may help with exams.  

I. Capitalism answers the key economic question one video

II. Market system evaluated     

III. Other economic systems one video    

Updated 10/29/17      Please  

I. Capitalism answers the key economic question
     A. What to produce?
           1. Which goods?
               a. Those that can be sold at a profit, consumers vote with dollars
               b. Accounting Profit: The amount by which total revenue exceeds accounting costs
                  (rents, wages, and interest) Note these are three of the four
Factors of Production    
               c. Normal Profit
                   1. Amount received for enterprise
                   2. Considered by economists to be a cost
Economic Profits
                  1. The amount by which total revenues exceed all "Factor" costs. Some think
                      of it as a surplus.
                  2. Expanding industries have economic profit. 
                      a) Bill Gates, founder of Microsoft, has earned many
billions of dollars. 
                      b) So has Sam Walton of Wal-Mart 
Lester C. Thurow Profits, The Concise Encyclopedia of Economics.  
Difference between accounting economic and-normal
        2. How many goods?
            a. Level of demand and efficiency of supply determine output.
            b. Society determines total demand (who works, how often and for how many years).
            c. Success of economic system determines efficiency of supply.
Wealth Hits Another Peak. Time to Celebrate or Worry? 8/1/17
 Editor's Note: Income distribution id a political question.
    B. How to produce?
          1. Companies must be competitive
          2. Competition is the "Invisible Hand" assuring
              a. High quality goods are produced.
              b. Efficient production methods are employed.
              c. Prices and profits are reasonable.
              d. For more read
Adam Smith and the invisible hand by Helen Joyce of Plus magazine.

         3. Technology and innovation are instrumental to success.
. Who will receive production?
1. Those willing and able to pay
         2 .Function of income, savings, and attitude toward debt financing
         3. In a Mixed Economy the government has a say in who receives production
 D. How will the economy adapt to changing environments?
 1. Today's economic environment is changing rapidly because of the communication
         2. Magnitude of change is similar to that which occurred in the last quarter of the
             19th century. 
Economic Normality 1945-2015 and World Changed and Good Jobs Disappeared and
                   Why the Fed simply doesn't get it [effect of end of inflation in our flat world]
         3. Companies and individuals must "adapt or be gone." 
         4. Capitalism allows creative destruction to work. 
         5. Recently technology has changed rapidly and people are being adversely affected 
             a. Normally, political forces would attempt to slow creative destruction.
             b. But the 1990's was the decade of free enterprise with little creative destruction talk.
             c. Perhaps the next recession will slow down the free market revolution.
    E. Visit
What is Capitalism? for a socialist view of economic questions and capitalism.

Unit I Review What and how to produce, Who receives production,
 adapting to changing environment

Economics is About Reducing Scarcity

Who Will Receive Production is a Political Question

Image result for Politics and change cartoons

II. Market system evaluated
    A. Advantages
          1. Resources allocated efficiently
          2. Economic freedoms abound (freedom of enterprise and economic choice) 
    B. Disadvantages
         1. Too dependent upon competition  which is often eroded by monopoly power. Waste and 
             inefficiency result because of monopoly power exercised by business, unions,
             governments, and interest groups.
         2. Inequitable distribution of income (economic survival of the fittest)
         3. Market failure occurs 
             a. Not all costs (pollution) and benefits (public health) are properly accounted for. 
             b. Why? because measuring their cost and benefits in dollars is difficult and subjective.
         4. Political process sometimes interferes with creative destruction.
    C. Current Topics
         1.  Basic Characteristics of Capitalism
         2. Political process sometimes interferes with creative destruction affecting efficiency
Modern Capitalism has many new features

Criticism of Modern Capitalism    

Unit II. Review Efficiency and freedom must be balanced with need for regulation and income inequality.


  III. Other Economic Systems
  A. Introduction
           1. Pure capitalism of Adam Smith never existed.
           2. Recent economic systems are
Mixed Economies(a mixture of Capitalism and Socialism)
Democratic Capitalism vs. Capitalistic Democracy
      B. Other Economic Systems         
 has some collective ownership and management of economic resources that
                 are more equally distributed.
See History of Socialism
Democratic Socialism as practiced in Western Europe has public ownership of key
                 industries such as transportation and communication.
                  a. Economic systems of Europe began moving away from socialism toward capitalism
                      in the late 1970's.
Margaret Thatcher former prime minister of England started this trend.
Ronald Reagan agreed and stressed the market system during his presidency. 
                 d. Capitalism and Socialism
Capitalism vs. Socialism Crash Course Video in World History
                         #33 uses humor teaching the basics.
Laissez fair Capitalism vs. Socialism Video See Social democracy 

                        Editors Question: Will China's system m
Democratic Socialism?
  3. Communism is the ideal of those practicing a "Marxian  system. " 
Bolsheviks wanted immediate revolution.
                        a. 19th century philosopher
Karl Marx created the system.
                        b. Wealth is collectively owned and managed in this
planned command economy.
                        c. The 
Paris Commune of 1871 along with the French Revolution explains why so
                            many feared change promised by new liberal economic systems.
                        d. Some equate communism with a totalitarian political system democratic
                            communism has never existed.
                        e. This very left pro-labor anti-religious economic philosophy was despised by most
                            Western Oligarchs many of whom preferred Nazi Fascism over any bran of

                        f. Ten Questions and Answers About Americas Big Government


              Unit III. Review Socialism has government ownership and management
                           of large-scale means of production, Communism has
equal distribution of production and wealth

Some Criticize Dramatically

Some Question his motives as
 Michael Moore's estimated net worth is
 50 million dollars.


Ronald Reagan and Margaret Thatcher at the White House,
16 November 1988  Click to enlarge.

US Economic History

US Economic Normality 1945-2015
page 2 Bailouts, Safety
Net, profit vs. Labor, Wellbeing

Great Recession 1p or 3 p

Severe Recessions 2p 

History of US Banking

Recent Decades Ranked by Problems 2p

20th Century Decade Evaluation 10p

Capitalism Not to Blame for
 Middle-Class Plight

Recent Decades Problems

Economic Issues for Discussion 

Political Economy
 Book Summaries

Presidential Courage
Brave Leaders and How They Changed America 1789-1989
 by Michael Beschloss

Presidential Politics
Party Politics and Presidential Elections  from 1788 to 2012

20th Century
U.S. Political Economy
interaction of politics and economics edited 
by Walter Antoniotti

Presidential Politics
Party Politics and Presidential Elections  from 1788 to 2012

20th Century U.S. Political Economy: an interaction of politics and economics edited by Walter Antoniotti