2. Capitalism (Free market economy) –
It is an economic system in which
private individuals own all the material
means of production & all economic
activities are undertaken for purpose of
profit.
3. Features of capitalism - Right to private property.
- Right of inheritance.
- Freedom of enterprise.
- Freedom of choice for consumers.
- Profit motive.
- Competition.
- Price mechanism on market forces.
- Less role of government.
4. Merits of capitalism - Efficient utilization of resources.
- Rapid economic growth.
- Capital formation.
- Democratic nature.
- Innovation.
5. Demerits of capitalism - Concentration of economic power.
- Economic instability.
- Lack of maximum social satisfaction at minimum
social cost.
- Social waste.
- Rise of monopoly.
- Social discrimination.
- Loss of human values.
6. Socialism (controlled economy or
communism) –
In this state owns & controls all means of
production. Decisions pertaining to
production, distribution are made through
central planning. The state dictates the
consumption pattern. It is based on the
principle: “from each according to his ability
to each according to his needs”.
7. Features of socialism - State ownership of means of production.
- Central economic planning.
- Social welfare.
- Equality of opportunity.
- classless society.
- Absence of competition.
8. Merits of socialism - Social justice.
- Economic stability.
- Rational allocation of resources.
- Higher economic growth.
- Absence of class struggle.
9. Demerits of socialism - Concentration of economic power in the state.
- Lack of incentive & initiative.
- Loss of consumer sovereignty.
- Loss of occupational freedom.
- Inefficiency & low productivity.
- Corruption.
