Question

Explain the four characteristics of the capitalist economy.

Answer 1

Answer:

1. A Two-Class System

Historically, a capitalist society was characterized by the split between two classes of individuals—the capitalist class, which owns the means for producing and distributing goods (the owners) and the working class, who sell their labor to the capitalist class in exchange for wages. The economy is run by the individuals (or corporations) who own and operate companies and make decisions as to the use of resources. But there exists a “division of labor” which allows for specialization, typically occurring through education and training, further breaking down the two class system into sub-classes (e.g., the middle class).  

2. Profit Motive

Companies exist to make a profit. The motive for all companies is to make and sell goods and services only for profits. Companies do not exist solely to satisfy people's needs. Even though some goods or services may satisfy needs, they will only be available if the people have the resources to pay for them.

Understanding Capitalist Economy Traits

3. Minimal Government Intervention

Capitalist societies believe markets should be left alone to operate without government intervention. However, a completely government-free capitalist society exists in theory, only. Even in the United States, the poster child for capitalism, the government regulates certain industries, such as the Dodd-Frank Act for financial institutions. By contrast, a purely capitalist society would allow the markets to set prices based on demand and supply for the purpose of making profits.  

4. Competition

True capitalism needs a competitive market. Without competition, monopolies exist, and instead of the market setting the prices, the seller is the price setter, which is against the conditions of capitalism.  

5. Willingness to Change

The last characteristic of capitalism is the ability to adapt and change. Technology has been a game changer in every society, and the willingness to allow change and adaptability of societies to improve inefficiencies within economic structures is a true characteristic of capitalism.

Explanation:

Answer 2

FEATURES:-

• There is a private ownership of the means of production.
• Means of production are used in a manner such that the profits are maximized: if labour is cheap, labour intensive methods of production is employed, and vice versa.
• Only those goods are produced which can be sold at a profit either in domestic market or foreign market.
• Distribution of the goods among people happens on the basis of purchasing power - the ability of people to pay for goods and services.
• The role of the government is largely confined to the maintenance of law and order and defence of the country.