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Capitalist Economy Essay

The right of private property means that productive factors such as land, factories, machinery, mines etc. are under private ownership. The owners of these factors are free to use them in the manner in which they like. The government may; however, put some restrictions for the benefit of the society in general;

Freedom of enterprise:
This means that everybody engages in any economic activity he likes. More specifically he is free to set up any firm to produce goods.

Freedom of choice for the consumers:
This means that people in a capitalist economy are free to spend their income as they desire. This is known as consumer sovereignty. Consumers are sovereign in the sense that producers produce only those goods which consumers are willing to buy.

Profit motive: In a capitalist economy, it is the profit motive which forces or induces people to work and produce; Competition: Competition prevails among the sellers to sell their goods and among buyers to obtain goods to satisfy their wants. Advertisement, price cutting, discount etc., are found to be the normal methods of competition in any capitalist economy.

Inequalities of incomes: There is generally a wide gap of income between the rich and the poor in the income which mainly arises due to unequal distribution of property in such economies.

Merits of capitalist economy:
The following are the merits of capitalist economy:
1.To attract the consumer, the producer is in a position to bring out newer and finer varieties of goods; 2.The existence of private property and the driving force of profit motive results in high standard of living; 3.Capitalism works automatically through the price mechanism; 4.The freedom of enterprise results in maximum efficiency in production; 5.All activities under capitalism enjoy the maximum amount of liberty and freedom; 6.Under capitalism freedom of choice brings maximum satisfaction to consumers; 7.Capitalism preserves fundamental rights such as right to freedom and right to private property; 8.It rewards men of initiative and enterprise;

Country as a whole benefits through growth of business talents, development of research etc.,

Demerits of capitalism:
The following are the demerits of capitalism:
1.In capitalism the enormous wealth produced is apportioned by a few. This causes rich richer and poor, poorer; 2.Welfare is not protected under capitalism, because here the aim is profit and not the welfare of the people; 3.Economic instability in terms of over production, economic depression, unemployment etc., is very common under capitalism; 4.The producer spends huge amounts of money on advertisement and sale promotion activities like fairs, exhibitions etc., 5.Class conflict arises between employer and employee and they will be paid low wages and this leads to strikes and lock outs; 6.Productive resources are misused under capitalism and they are used for the production on luxuries as they are bound to bring high profits; 7.Capitalism leads to the formation of monopolies and

8.There is no security of employment for the workers and employees under capitalism.


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