Cite some disadvantages and advantages of capitalism and communism as an economic system
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Answer:
Economy' is defined in this lesson as the wealth and resources of a region in terms of the production and consumption of goods and services. There are two types of economies: formal and informal. Formal economies consist of those driven by the market or government, while informal economies exist without formalized policies or regulations.
This lesson will discuss formal economy systems in terms of capitalism and socialism and the underground economy, which is considered an informal economy. We will cover the key characteristics, advantages, and disadvantages of these types of economies
Formal economies operate within limits of established and monitored policies and regulations. Capitalism and socialism are formal economies.
The major differences between capitalism and socialism revolve around the role of the government and equality of economics. Capitalism affords economic freedom, consumer choice, and economic growth. Socialism, which is an economy controlled by the state and planned by a central planning authority, provides for a greater social welfare and decreases business fluctuations.Capitalism is characterized in the following ways:
It is a market-based economy made up of buyers (people) and sellers (private or corporate-owned companies).
The goods and services that are produced are intended to make a profit, and this profit is reinvested into the economy.
The government should not interfere in the economies of the free market, meaning, the market determines investments, production, distribution and decisions, and government interference is only allowed when making and enforcing rules or policies governing the conduct of business.
There is a need for continual production and purchase for a capitalistic economy to operate efficiently.
Capitalists believe that government does not use economic resources as efficiently as private enterprise.
The U.S. is considered to be a capitalist economy, along with most of the modern world; however, economists are quick to point out that almost every society has a socialist aspect or program within it.
Capitalism: Advantages and Disadvantages
The advantages of capitalism include:
Consumer choice - Individuals choose what to consume, and this choice leads to more competition and better products and services.
Efficiency of economics - Goods and services produced based on demand create incentives to cut costs and avoid waste.
Economic growth and expansion (which is possible in the capitalist economy system) - This increases the gross national product and leads to improved living standards
Explanation:
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