capitalism, poverty and inequality

• Factors of production


  • Land
  • Capital
  • Enterprise
  • Labour
• Capitalists


  People who own and use any of the factors of production in hope of making profit
• Capitalism


  An economy with capitalists in it
• Types of economies


  • Command economies
  • Mixed economies
  • Free market economies
• Command economies


  • All factors of production are allocated by the state
• Mixed economies


  • Some factors of production are allocated by the state or price mechanism, others by the price mechanism or state
• Free market economies


  • All factors of production are allocated by the price mechanism
• Capitalist economic growth


  1. Increased investment

  2. Increased employment

  3. Increased consumer spending

  4. Increased consumption

  5. Increased profits

  6. Increased investment again

  7. Increased AD

  8. Increased economic growth
• Increased spending in the local economy

  • Increase in consumption
  • Outward shift in aggregate demand
  • Increase in real GDP
• Economists think capitalism is a great thing because capitalists invest their money in the economy, leading to an outward shift in aggregate demand, positive multiplier effects, increased consumption, and an outward shift in LRAS and increase in real GDP
• Capitalists can decide their own incomes or wages


  They can pay themselves big wages and their workers very low wages
• The R > G hypothesis shows that the owners of capital will grow richer than regular workers, leading to wealth inequality
• Capitalism creates inequality because people invest their money and make a big profit, while others invest and lose it all
• Mixed economies reduce the gap between winners and losers in capitalism
• Capitalism creates inequality


  It also led to the creation of employment and an increase in living standards for individuals
• Risk takers improve the whole economy by increasing investment, leading to an outward shift in aggregate demand, increased derived demand for labour, and greater output and improved living standards
• If capitalists save their wealth instead of spending it, there will be no trickle down of wealth and people's living standards or wealth will not increase
• Capitalists are motivated by profit so they will pay their workers low wages and make them work long hours