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Capitalism - Coggle Diagram
Capitalism
Economic institutions
Private property
It means that you own things that you can use and dispose of the way you want and exclude others from it
Since private property consists of goods, The most important goods that can be owned in capitalist societies are capital goods that we use to produce others, like machines.
buyers will not want to pay for goods unless they can have the right to own them.
Firms
Any company that makes a profit by manufacturing or selling products or services.
Firms created labour market, which means that the employers demand employees, while the workers work under the direction of the owners and managers who hire them.
Firms is the place where production happens. The inputs and outputs owned by the owners, are private property. These firms are used to sell goods and services to make a profit.
Markets
It means the transfer of goods or services from one person to another.
They connect people that are looking for mutual benefit by exchanging goods and services through buying and selling.
they are reciprocal and voluntary
competition between sellers and buyers is important, but cooperation can pursue their individual objectives and work together to distribute resources.
Markets accomplish unintended cooperation on a global scale.
When we talk about institutions, we refer to the sets of laws and social customs that are in charge of production and distribution between families, private businesses, and government bodies.
Specialization:
Technologies and specialization explain the economic growth that was led by capitalism. It allowed individuals to focus on one activity and not all of them.
when people specialize in one activity, it's better because we learn by doing it more frequently.
The complicated part of specialization is that you will be depending more on others to produce the goods that you need and you are not producing anymore.
The division of labor happens in things like a traditional factory, where each worker specializes in one task, or in modern firms, where there are different roles in the hierarchy and each one of us specializes in one activity so we become better at it.
Revolution
The industrial revolution is the process of change from an agrarian and handicraft economy to one dominated by industry and machine manufacturing.
After learning about the industrial revolution, we can also learn about part of the explanation of the rapid growth of capitalism.
In with increased foreign trade, which led to the emergence of a new class of merchant capitalist.
when capitalism was introduced among the Industrial Revolution and the Enlightenment, it meant an extraordinary revolution in many different senses with important consequences:
exponential growth in productivity that we measure using GDP, and the market value of every good and service a country produced during a year, (services like haircuts, therapy, gymnasiums, or goods like cars, food, or cloth.)
What is capitalism?
Capitalism is an economic system that is a particular combination of institutions. It is a way of organizing the production and distribution of goods and services in an economy.
It combines centralization with decentralization, it concentrates power in the hands of owners and managers, but limits the power other owners because of the competition in buying and selling in markets.
Conditions that are essential to capitalism:
Economic conditions
Capitalism is dynamic when private property is secure with the rule of law, when markets are competitive and/or when owners or managers have their position because of their talent and not their connections.
When these conditions are not met, people will rather have incentives spent in things like lobbying or criminal activities, than in creating economic value.
Political conditions
the government provides goods and services that are essential for humans.
Supports the institutions of the capitalist economic system.
They keep encouragement for competition and innovation, best managers and firms surviving, public policy that supports basic services and help to keep a stable society, good environment, and resource base.