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Capitalist economy

The capitalist system is also known as free enterprise economy and market economy. It is characterized by the private ownership, individual decision making. Characteristics of capitalism 1) Free enterprise 2) Private ownership 3) limited role of government 4) absence of a central plan 5) competition
6)

freedom to save or invest freedom of choice of occupation

Merits of capitalism Private ownership ensures that entrepreneur have a right to the profit generated by their own efforts. This give entrepreneur an incentive to search for better ways of serving consumer needs. That may be through introducing new products, by developing more efficient production processes by better marketing and after sales service. Demerits of capitalism Sufficient investment may not take place in areas where profitability is low. The right to property and freedom of enterprise are likely to lead to concentration of income and wealth. Capitalism divides the society into two the haves and the havenots.

Large firm is likely to gain an advantageous position.

Socialist economy
Socialism is an economic system where the means of production are either owned or controlled by the government and the resource allocation, investment pattern, consumption, income distribution etc are directed and regulated by the state. Characteristics of socialism 1) Government ownership 2) Distribution of income 3) Restriction of occupation 4) Central authority 5) Restriction on consumption 6) Social welfare Merits of socialism 1) Socialism has become a very appealing and flexible concept. 2) Less exploitation 3) Price control 4) Social welfare 5) Class less society 6) Importance of labor 7) Regulation of government over property and means of production. Demerits of socialism

1) Too much of government intervention hinders the economic growth. 2) Too much of job security. 3) Talents of nations are not fully utilized. 4) The view of central planning authority need not be always right.

Difference between capitalism and socialism CAPIATLISM Private ownership Class conflict Exploitation Profit motive Key role of price mechanism in economy Dominance of private sector Inequalities in distribution Problem of unemployment Economic freedom Production based on purchase power of people. SOCIALISM Government ownership No class conflict Social interest Welfare motive Key role of governmet agency Dominancy of public sector Minimum inequalities Guarantee of employment Lack of economic freedom Production based on essential requirement of the people.

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