Explain the following concepts.

Capitalism

By definition, “an economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state” is called capitalism.

The main characteristics of capitalism are:

1) A Two-Class System

• A capitalist society was characterized by the split between two classes of individuals—the capitalist class, and the working class,

• Capitalists own the means for producing and distributing goods (the owners) and the working class is who sell their labor to the capitalist class in exchange for wages.

• The economy is run by the individuals (or corporations) who own and operate companies and make decisions as to the utilization of resources.

• there exists a “division of labor” which allows for specialization,

• This specialization is occurring through education and training, further breaking down the two-class system into sub-classes (e.g., the middle class).

2) Profit motive

• Companies exist to make a profit and therefore it has a market nature

• The motive for all companies is to make and sell goods and services only for profits.

• Companies do not exist solely to please people's needs.

• Even though some goods or services may perhaps satisfy needs, they will only be available if people have the capital to pay for them.

3) Minimal Government Intervention

• Capitalist societies need the freedom to operate without even any government intervention.

• But, a completely government-free capitalist society exists in theory, only.

• Even in European countries, the government regulates certain industries.

• A purely capitalist society would permit the markets to set prices based on demand and supply for the purpose of making profits.

4) Competition

• True capitalism needs an economical market which is competitive.

• Competition prevent the formation of monopolies

• market sets the prices, not the seller

5) Willingness to Change

• Capitalism has the ability to adapt and change.

• willingness to allow change and adaptability of societies is essential in the period of technology

• It improves inefficiencies within economic structures is a true characteristic of capitalism.