COMMUNISM AND CAPITALISMComparing the Economic Systems

Economy

How a country distributes money and wealth.

Goods A physical product that can be sold for

money.

Examples: clothing, cars, books, computers, food.

Services Anything someone does for money.

Examples: doctors, teachers, cleaners, mechanics

Producers The people who make goods in order for

them to be sold. Example: Nike, Apple, Honda

Consumers People who buy goods and services.

Sellers The middleman. Buys products from

consumers and sells it to consumers. Examples: Wal-Mart, Best Buy, Stop &

Shop

The Means of Production What a producer needs in order to

produce a good. Examples: Land, labor, raw materials,

machinery, power, factories

Cost of production How much money it costs to produce a

good. (How much money the means of production cost.)

Profit The money producers earn when the

costs of production are considered. Selling Price – Cost of Production = Profit

Whoever owns the means of production

gets to keep the profits.

Capitalism An economic system where private

individuals own the means of production.

Under Capitalism, private individuals get to keep the profits.

Example: Bill Gates owns Microsoft, so he gets to keep Microsoft’s profits.

Communism An economic system where the

government owns the means of production

Under Communism, the government keeps the profits. They decide how the profits are going to be divided among the people.

Under Capitalism Some people get to be very very rich,

while many people are poor. There is a high level of income

inequality.

Under Capitalism Good: More Freedom. Possibility of

moving into a higher class level.

Bad: Many poor people. Unemployment.

Under Communism Very few people are either very rich or

very poor. Very little income inequality.

Under Communism Good: Not as many poor people.

Everyone gets their basic necessities met.

Bad: Less freedom. Government makes a lot of decisions about your life.