private individuals own all the material means of production & all economic activities are undertaken for purpose of profit. 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. Merits of capitalism -
- Efficient utilization of resources.
- Rapid economic growth. - Capital formation. - Democratic nature. - Innovation. 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. 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”. Features of socialism -
- State ownership of means of production.
- Central economic planning. - Social welfare. - Equality of opportunity. - classless society. - Absence of competition. Merits of socialism -
- Social justice. - Economic stability. - Rational allocation of resources. - Higher economic growth. - Absence of class struggle. 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.