Capitalism is an economic system that is based on private ownership of means of production and the production of goods or services for profit. It could also be defied as a social and economic system where capital assets are mainly owned by private individuals, where labor is purchased for money wages, capital gains accrue to private owners, and the price mechanism is utilized to allocate capital goods between uses. Capitalism is characterized by private ownership of factors of production and the government of the nation does not interfere in the economic activities of the country. It can also be referred to as ‘Free Market Economy’. CHARACTERISTICS OF CAPITALISM
* Private ownership of property: In a capitalist economy, people have full right to use their private property anyhow they like without the intervention of the government. Property can be passed to successors in case of the owner’s death. * Price mechanism: In capitalism, price is determined by the forces of demand and supply. Government does not interfere in the fixation of price. * Consumer sovereignty: In this economy, consumer is sovereign; he only buys those things which give him maximum satisfaction. * Freedom of enterprise: In capitalism, every enterprise is free to choose any business it deems fit and can also take independent decisions on its own. * Profit motive: Capitalism also based on profit maximization. * Competition: Capitalism leads to more and more competitions which ultimately results in efficiency of industrial units and production of goods at low costs.
MERITS OF CAPITALISM
* It is self-regulatory by market mechanism leading to several benefits for the economy. E.g. it saves additional wastes and resources. * Economic growth it said to be faster here because the investors try to invest in only those project’s, which are economically viable as dictated by the...
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