The advantages of a capitalist economy

THE ADVANTAGES OF A CAPITALIST SYSTEM

Definition of capitalism

Capitalism is an economic, political and social system which is practiced in many countries of today. Some of the countries where this system is practiced include, but is not limited to, the United States of America, Britain, France, Germany, to mention but a few. In this system, the means of production and distribution of goods and services are in the hands of private individuals. The main motivation of the players in this system is to make profit.

THE MAIN MERITS OR ADVANTAGES OF CAPITALISM

Promotes the production of quality goods

A capitalist system encourages competition among various producers and providers of goods and services. Each competitor tries to produce a better quality of product than the other. In the end only the best quality floods the market. The punishment for not doing so is have one’s product rejected by the consumer, leading to the loss of needed profit, affecting the bottom line.

There is freedom of choice

The capitalist system offers the opportunity for people to make informed choices. Every citizen decides the type of economic activity he or she wants to engage in. That is, whether he wants to go into the production of one item of the other. The working class also determines the type of industry they want to work in. Finally, the consumers have the opportunity to decide which type of product they want to purchase. In short, everyone has a choice.

Resources are optimized

The embedded feature of capitalism to make profit; pushes for the optimum utilization of available resources. There is a great competition among producers to capture a bigger chunk of the market size, so entrepreneurs are always in the look-out for how to maximize the resources employed in production so as to positively increase their profit margin and still sell products within the competition.

Availability of variety

The competition in capitalism encourages industrialists to experiment with various concepts in the production of their goods. A little change in design, a little twist to the colour of a product, a little improvement in the packaging of a product is common phenomenon in capitalism. The result is that the consumer has so many different types of the same product. In short, there is abundant of products for the consumer to choose from.

It encourages initiative

Another advantage of capitalism is that it promotes initiative on the part of citizens. Citizens want to venture into virgin areas of the economy and come out with products to ease the lives of people and in return, get cash rewards in monetary terms. In a capitalist system, for example, you would see people inventing new stuff, people developing new apps to improve ways of doing old things. In the end, business is developed and income is generated for the individual.

Encourages efficiency in production

As a result of the competitive environment, entrepreneurs always research into more efficient ways of producing their goods. This is to drive down the cost of production and maximize profit.

SAMPLE QUESTION(S)

1. Highlight six advantages of capitalism

2. Why do countries adopt the capitalist economic system?

ALSO READ:
The main features of a capitalist system
The disadvantages of capitalism

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