Capitalist Economy

Capitalist Economy:

The capitalist economy is an economic system in which the manufacture and distribution of commodities occur via the mechanism of free markets. Therefore it is also termed as market economy or free trade economy. All individual be it a producer, consumer or resource owner contain considerable economic freedom. An individual has the freedom to purchase and sell any number of goods and services and to select any occupation. Therefore a market economy has no central coordinator conducting its operation. However self-organization emerges amidst the functioning of market forces viz., supply, demand & price. The salient features of capitalism are as follows:

1. Right to Private Property:

Individuals include the right to purchase and own property. There is no limit and they can own any number of property. They also contain legal rights to employ their property in any manner they like.

2. Profit-Motive:

Profit is the only reason for the functioning of capitalism. Production decisions including high risks are taken by individual only to earn big profits. Therefore, profit reason is the fundamental force which drives the capitalist economy.

3. Freedom of Choice:

The question ‘what to manufacture?’ will be find out by the producers. They encompass the freedom to decide. The factors of production can also be used anywhere freely to acquire due to the prices for their services. Likewise consumers have the freedom to purchase anything they desire.

4. Market Forces:

Market forces such as demand, supply & price are the signals to direct the system. Most of the economic actions are centered on price mechanism. Production, consumption & distribution questions are predictable to be resolved by market forces.

5. Minimal role of Government:

Since most of the fundamental economic troubles are expected to be resolved by market forces, the government comprise minimal role in the economy. Their role will be restricted to some significant functions. They comprise regulation of market, defense, currency, foreign policy, and so on.

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