Characteristics of the Capitalist Economy That Need To Be Understood

Characteristics of the Capitalist Economy

The main characteristics of the capitalist economy need to be known by everyone in a country. There are two types of economies that are applied by some of the most common countries namely socialism and capitalism. The free market economy is often associated with capitalism because it is the purest form of socialism and the most common is communism.

Political and social elements that affect the level of purity of each of these economic systems. In other words, many capitalist countries have an element of intertwined socialism. So, even though there are different levels or levels of commitment to the ideals of capitalism there are some common characteristics among all capitalists.

1. Two Class System

Historically, capitalist society is characterized by a split between the two classes of individual capitalist classes, which have the means to produce and distribute goods (owners) and the working class, who sell their power to the capitalist class in exchange for wages. The economy is run by individuals (or companies) who own and operate companies and make decisions about the use of resources. But there is a "division of labour" that allows specialization, usually through education and training, which then breaks up the two-class system into sub-classes (eg, middle class).

2. Lucky Motives

Companies exist to make a profit. The motive for all companies is to make and sell goods and services just for profit. Companies do not exist solely to meet the needs of the community. Although some goods or services can make ends meet, they will only be available if people have the resources to pay for them.

3. Minimal Government Intervention

Capitalist society believes the market must be left alone to operate without government intervention. However, the capitalist society which is completely free of government only exists in theory. Even in the United States, a poster child of capitalism, the government regulates certain industries, such as the Dodd-Frank Act for financial institutions. Conversely, a purely capitalist society will allow the market to set prices based on demand and supply with the aim of making a profit.

4. Competition

True capitalism requires a competitive market. Without competition, a monopoly exists, and instead of the market-setting prices, sellers are determinants of prices, which contradict the conditions of capitalism.

5. Willingness to Change

The final characteristic of capitalism is the ability to adapt and change. Technology has become a game-changer in every society, and the willingness to enable change and the ability to adapt society to increase inefficiencies in the economic structure is a true characteristic of capitalism.

Thus a brief description of the characteristics of capitalist economics that everyone needs to understand.

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