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Socialism, Capitilism, and Mixed Economies

From the start of civilization our world has progressed in many ways. Our governments and economic systems have been changed and modernized tremendously along the way. Two forms of economic systems have seemed to stand out from the rest. These two types of economic systems are socialism and capitalism. We will look into both of these thoroughly. Lets start with capitalism.

In a capitalist economy citizens invest their money, land, or machinery in a business. Capitalist economies strive on private ownership of corporations rather than governmental ownership (as in socialist economies). Every capitalist economy operates based on 4 principals, these are: private ownership of the factors of production (as we just mentioned), free-market economy, competition, and profit. Now lets look into these little further.

A free-market is critical to a capitalist system because it allows the free exchange of goods and services. In a free-market economy governments say little or nothing about what and how goods or services are produced. Profit is another important factor of capitalism. Profit is the difference between the revenue received from the sale of a good or service. As you recall earlier we discussed that a capitalist is a person who invests his or her money into a business or industry. Profit is the key to lure people into investing their money because of the potential money they can gain. Competition influences a capitalist economy because it is the principal which drives a business to attract more customers. Businesses which sell similar good or services, like Exxon and Shell, compete which each other, through price and quality/quantity of their goods, to attract the greatest amount of customers. Speaking of price, supply and demand is the law which influences the price of goods in a capitalist economy. Supply is the amount of goods available and demand is the level of consumer-demand for the good. The law is simple, high supply and

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