Capitalist Economy
The means of production are privately owned and goods and services are produced for private profit is called a' capitalist economy'. In a capitalist economy, the role of the government in the production and distribution of goods and services is minimal. The production and distribution of goods and services is ensured by the private sector and their prices are determined by the market forces i.e. demand-ware and supply. In a capitalist economy, economic decisions are taken with the aim of maximizing profit. The United States is the best example of a capitalist economy. Britain, Japan, etc. are developed countries The idea of capitalist economy was introduced in Adam Smith's book 'The Wealth of Nations' (introduced in 1776). Adam Smith in his non-interference by government intervention in the economy, emphasizing on the division of labor According to the 'Laissez faire',the state government should not interfere in the process of production and distribution of goods and services and this work is done by market forces i.e. demand and supply.
In a capitalist economy, economic activities are controlled by market forces.Under this, economic decisions are taken with the aim of maximizing profit. Economic activities are active in the private sector. Under the capitalist economy, production is done according to the choice of the consumer, so here the consumer dominates. Most of these resources are controlled by the private sector. The price of goods and services is determined by the market by demand and supply .
Features of Capitalist Economy:
- Market Decide how to maintain prices of commodities
- Right to private property
- Maximize Profit Purpose
- Economic freedom
- State of Competition
- Importance of Demand and Supply
- The variety and quality of goods and services
Lack of State Government intervention etc.
