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Capitalism

Capitalism is one of the systems of political and economic governance that is based on the idea of private ownership of modes of production and capital. In this system, the production of goods and services is done for the sole sake of profit. The goods and services are produced in accordance with the demand and supply from the general market rather than moving with the planned economy system. One of the main characteristics of capitalism is competition between the producers. The participation of government and the general rules and regulations associated with capitalism vary from model to model.

Class Division

Capitalism exists in almost all countries of the world now. This system has made the means of production limited to a small minority referred to as the capital class. The majority of the people make their living by selling their ability to work and being paid a salary or wage in return. This majority is referred to as the working class.

The working class is primarily responsible for creating and producing the goods and the services . These are then sold in the general market for profit, which again is gained by the capital class. This way, the working class is exploited by the capital class. As a result, accumulation of wealth increases with the capital class and is resulting in a huge class differences among people, leading to a distinct higher and lower class.

The Profit Move

The motive for producing goods and offering services in capitalism is not to satisfy the needs of people but to sell them for a profit. The main idea of capitalism is to produce goods and sell them to people with high profit margins, thus making more money than was initially invested in the project. Production, therefore, does not begin when there is a need for a particular good in the market, but begins when the capitalists think that they can sell the product for a profit.

Competition

In capitalist economy, competition is widespread. There is a market competition for selling goods that are similar in nature but produced by different capitalists. There is competition for market share, increasing profits, and increasing the volume of sales by playing with the elements of marketing mix: identification of wants, promotion, and product and distribution. Competition is a major factor in capitalist economy and highly affects the prices of the goods that have to be paid by the general consumer.


Further Reading




Q&A About Capitalism


Who owns the means of production under capitalism?

Under capitalism, the means of production are owned by private individuals.

What does capitalism stand for?

Capitalism stands for private ownership of modes of production and capital.

How does one become rich under capitalism?

One becomes rich by accumulating wealth through exploiting others' labor. This accumulation leads to huge differences among people leading to distinct higher and lower classes. The motive for producing goods and offering services in this system is not to satisfy the needs of people but rather sell them at high profit margins thus making more money than was initially invested in it. Production therefore does not begin when there is a need for a particular good or service but rather begins when there is an opportunity for profit-making .

How do you define exploitation under capitalism?

Exploitation refers to making money from someone else's work without paying them fairly.

What happens if you want something that you cannot afford ?

You will be unable answer your desire until you get enough money saved up so that you can buy it .

Is GDP always equal to total income earned within an economy ?

No , GDP does not always

What is the difference between capitalism and socialism?

The main difference between capitalism and socialism is that in a capitalist system, goods are produced to make profit while in a socialist system, goods are produced to meet the needs of people.

Why do some countries have mixed economies instead of purely capitalist or socialist systems ?

Some countries have mixed economies because they feel that both systems have their advantages as well as disadvantages .

How can we measure economic growth ?

We can measure economic growth by measuring Gross Domestic Product (GDP) which measures how much value has been added during a given period .

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