Indian Economic

Environment
Lecture-4th
Unit -1st
By Preeti Singh

The economic system may broadly be divided as

under

Capitalism
Socialism
Mixed Economy

Capitalism
Free

enterprise economy
or free market economy

Laissez Faire

(allow to do)

Characteristics
Price Mechanism
Self Interest
Profit Motive
Competition
Freedom of Enterprise
Consumers Sovereignty
Labor Power is Commodity
Private Ownership
Emergence of classes
Limited role of Govt.

Merits of Capitalism
Suitable to democratic set up
Economic freedom
Efficient use of resources
Flexibility and automatic equilibrium
Diversification and increase in production
Encourage development

Demerits of Capitalism
Erosion of Human Values
Economic & Social Inequalities
Class Conflict & Exploitation
Too Much Wastage
Trade Cycles
Problem of Unemployment

Meaning of Socialism
It is known as the communist economic system or
centrally planned economy.
Broadly speaking ,the term socialism has been
called many things and many things have been
called socialism

The founder member of socialism and

communism is KARLMARX
In socialism ,property and the means of
production are owned ,controlled and managed by
the state

Definition of Socialism
A socialized industry is one in which the national
instruments of production are owned by the public
authority or voluntary association and operated
not with a view to profiting by sale to other people,
but for the direct service of those whom the
authority or association represents.

By Prof. Webbs

Characteristics
No private enterprise
Property and means of production are owned,
controlled and managed by the government.
Class less society
Laborers are supreme
Proper recognition
Full employment

Merits of Socialism
Reduction in economic and social inequalities
Rapid economic development
Proper allocation of resources
Check on Trade Cycles
Less Unemployment
End of Exploitation

Demerits
Lack of rational calculation of costs
Bureaucratic tendency
Increase government power

Mixed Economy
Its a mixer of two

One of the pre-suppositions of a mixed

economy is that private firms are less
free to control major decision about
production and consumption than they
would be under capitalist-free
enterprise ,and that public industry is
free from government restrains than it
would be under centrally directed
socialist enterprise

Characteristics

Co- existence of both

Economic welfare
Economic planning
Free and controlled economic development

Merits of Mixed of Economy

Adequate Freedom
Maximum Welfare
Modern technology
Best Allocation of Resources

Demerits

Low inflow of foreign capital

Inefficiency of public sector
Maximum control on private sector
Fear of nationalisation
Presence of imbalance in Economy