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CHAPTER 3 SUMMARY

Stages of Economic History

• The earliest stage of economic history, primitive food gathering and hunting, was characterized by nomadic lifestyles and a rigid division of labor.

• The second stage of economic history, permanent agriculture and animal domestication, was characterized by the rise of settlements, specialization, and trade.

• The third stage of economic history, the industrial age, was characterized by industrialization and the supremacy of the factory system.

• The fourth stage of economic history, the information age, is characterized by the use of information and communications technologies (ICTs) to produce and distribute products.

Economic Systems: The Models

• A traditional economy relies on customs or traditions to answer the basic economic questions of what, how, and for whom to produce.

• A command economy relies on the government to answer the basic economic questions.

• A market economy relies on the private sector to answer the basic economic questions.

• A mixed economy combines features from the command and the market models to answer the basic economic questions. Most mixed economies lean toward the market model.

Capitalism

• The roots of capitalism are grounded in economic events in Europe, including the expansion of international trade and industrialization, and changes in people's worldview.

• Modern capitalism favors an expanded role for government in the national economy.

• Global capitalism is supported by new technologies and multilateral institutions, yet challenges remain for traditionally marginalized peoples.

Other Economic Systems

• Socialism favors some government ownership and control over certain key industries and policies to promote economic equity.

• Communism favors government ownership and control over most business enterprise, including the factors of production used in production.

• Economies transitioning toward capitalism have instituted reforms consistent with market principles.

 
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