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    Definition of Capitalism

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    Azhar 98
    Capitalism is an economic system where private individuals and businesses own capital goods and the means of production. Goods and services are produced based on supply and demand in a market economy rather than central planning. In pure capitalism, individuals operate freely without restraint in markets. The document outlines some key advantages and disadvantages of capitalism. Advantages include private property rights, competition driving innovation, and efficient allocation of resources. Disadvantages include a focus on profits that can increase inequality, financial instability, potential monopoly power, and limitations on moving the workforce to new opportunities.

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    Definition of Capitalism

    Uploaded by

    Azhar 98
    25 views2 pages
    Capitalism is an economic system where private individuals and businesses own capital goods and the means of production. Goods and services are produced based on supply and demand in a market economy rather than central planning. In pure capitalism, individuals operate freely without restraint in markets. The document outlines some key advantages and disadvantages of capitalism. Advantages include private property rights, competition driving innovation, and efficient allocation of resources. Disadvantages include a focus on profits that can increase inequality, financial instability, potential monopoly power, and limitations on moving the workforce to new opportunities.

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    Capitalism

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    Capitalism is an economic system where private individuals and businesses own capital goods and the means of production. Goods and services are produced based on supply and demand in a market economy rather than central planning. In pure capitalism, individuals operate freely without restraint in markets. The document outlines some key advantages and disadvantages of capitalism. Advantages include private property rights, competition driving innovation, and efficient allocation of resources. Disadvantages include a focus on profits that can increase inequality, financial instability, potential monopoly power, and limitations on moving the workforce to new opportunities.

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    © All Rights Reserved
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    25 views2 pages

    Definition of Capitalism

    Uploaded by

    Azhar 98
    Capitalism is an economic system where private individuals and businesses own capital goods and the means of production. Goods and services are produced based on supply and demand in a market economy rather than central planning. In pure capitalism, individuals operate freely without restraint in markets. The document outlines some key advantages and disadvantages of capitalism. Advantages include private property rights, competition driving innovation, and efficient allocation of resources. Disadvantages include a focus on profits that can increase inequality, financial instability, potential monopoly power, and limitations on moving the workforce to new opportunities.

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    Definition Of Capitalism

    Capitalism is an economic system in which private individuals or businesses own capital goods.
    The production of goods and services is based on supply and demand in the general market—
    known as a market economy—rather than through central planning—known as a planned
    economy or command economy.
    The purest form of capitalism is free market or laissez-faire capitalism. Here, private individuals
    are unrestrained. They may determine where to invest, what to produce or sell, and at which
    prices to exchange goods and services. The laissez-faire marketplace operates without checks or
    controls.

    Advantages Of Capitalism
    Private property: Everyone is entitled to own assets. People have the right to own their houses,
    cars and television sets. They can even own stocks and bonds.
    Self-interest: People are free to pursue their own good. They can do whatever they want without
    regard to pressure from politicians or consideration for what their neighbors think of their
    actions. The idea is that people's actions will help society as a whole. People are the most
    productive when they can earn money that gives them financial and political freedom.
    Competition: Since people have the right to own assets, companies will see this demand and
    start making products to satisfy consumers. As demand grows, more businesses will jump in the
    market and start competing with each other for the consumers' money. This should be a good
    thing; more competitors mean better quality products and lower prices. At the same time, these
    companies will have to hire more workers and pay them better wages.
    Freedom of Choice: Now, the consumer can choose among an offering of different products
    from several companies. No one can tell them that they have to buy a specific product from a
    specific company. Workers have the freedom to work for whichever company they choose. They
    can demand higher wages and better benefits.
    Innovation: Among the many capitalism advantages is the idea that capitalism encourages
    efficiency in the marketplace. Companies must find profitable ways to produce high-quality
    products that consumers want to buy.
    Efficient allocation of resources: Companies produce goods per the demands of consumers.
    Businesses do not make products that no one wants to buy. Firms have incentives to be
    productive; inefficient firms will go out of business.
    Limited government intervention: In a capitalistic society, the government has a smaller role.
    Taxes are lower, and there is less government intervention in the free market. The role of
    government is to protect the rights of private individuals, not to intrude on their personal
    liberties.
    Disadvantages Of Capitalism
    Focus on profit: The obsessive focus on profits leads to social and economic inequality. The
    population that controls the means of production tends to accumulate more wealth than the
    workers who helped to create those riches for the wealthy. Since rich families can pass on their
    wealth to their heirs, the rich get richer and the workers stay poor.
    Financial instability: Financial markets go through periods of irrational exuberance, causing
    boom and bust cycles. During a long recession, people can lose their jobs, have their houses
    foreclosed and suffer a decline in their living standards.
    Monopoly power: Because capitalism is a free market, it is possible for a single firm to become
    all-powerful and dominate a market. When this happens, a company can charge whatever price
    they want, and consumers have no choice but to pay higher prices.
    Workforce limitations: In theory, the factors of production should be able to move from an
    unprofitable use to a profitable business. But this doesn't work for the labor force. A farmer who
    just lost his job cannot hop on a plane and fly to a big city to take a job as a waiter.

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