Capitalist Economic System Flashcards, test questions and answers
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What is Capitalist Economic System?
Capitalism is an economic system that has become the dominant force in the world today. It is a system based on private ownership of production and trade, with the goal of making a profit. Capitalism involves market competition between businesses, free-market pricing, and the accumulation of capital by individuals. In capitalist economies, goods and services are produced to be sold at a profit. The price of goods and services is determined by supply and demand in the market rather than being set by government regulatory agencies or other entities. As such, capitalism encourages innovation as well as entrepreneurial activity.The main advantage of capitalism is its ability to generate wealth quickly and efficiently through market competition. This allows resources to be used more effectively than in other economic systems as businesses strive to produce goods or services at lower costs and higher quality levels in order to gain greater profits or market share. Capitalism also allows for greater economic freedom because individuals have more control over their own economic decisions compared to those made within a centrally-planned economy where decisions are made outside of the free-market mechanism.However, capitalism has its drawbacks as well; these include increased disparities in wealth between individuals due to unequal access to capital or other resources needed for success, exploitation of workers by employers who can pay them low wages due to limited alternatives, environmental damage caused by uncontrolled development motivated only by short-term profit seeking, corruption resulting from large companies’ influence over governments through financial contributions or lobbying efforts, etcetera. Additionally, during times of recession or other financial crises it can take longer for recovery since governments lack direct control over markets unlike they would have had under certain types of socialism (such as state socialism). In conclusion, while capitalism offers many advantages it should not be seen as a panacea for all economic issues since it also comes with some potential risks if not properly managed or regulated appropriately. It should however remain an important part of any country’s economy given its ability to create wealth quickly while still allowing citizens greater freedom when it comes time make their own economic choices.