How does a capitalist economy differ from a socialist economy. Give two points.
Answers
Answer:
capitalist economy
In capitalist economies, people have strong incentives to work hard, increase efficiency, and produce superior products. By rewarding ingenuity and innovation, the market maximizes economic growth and individual prosperity while providing a variety of goods for consumers. By encouraging the production of desirable goods and discouraging the production of unwanted or unnecessary ones, the marketplace self-regulates, leaving less room for government interference and mismanagement.
But under capitalism, because market mechanisms are mechanical, rather than normative, and agnostic in regard to social effects, there are no guarantees that each person's basic needs will be met. Markets also create cycles of boom and bust and, in an imperfect world, allow for "crony capitalism," monopolies and other means of cheating or manipulating the system.
socialist economy
In socialist societies, basic needs are met; a socialist system's primary benefit is that the people living under it are given a social safety net.
In theory, economic inequity is reduced, along with economic insecurity. Basic necessities are provided for. The government itself can produce the goods people require to meet their needs, even if the production of those goods does not result in a profit. Under socialism, there’s more room for value judgments, with less attention paid to calculations involving profit and nothing but profit.
Socialist economies can also be also more efficient, in the sense that there’s less of a need to sell goods to consumers who might not need them, resulting in less money spent on product promotion and marketing efforts.