15 Characteristics of Capitalism Economy (With Examples)

Capitalism economy is a system of the economic organization featured by the private ownership and use for the private profit of man-made and nature-made the capital.

characteristics of capitalism economy
characteristics of capitalism economy

There is private ownership of the means of production and distribution which are used for earning maximum profits according to the competition available.

The existence of the capitalism economy had been possible only by the amendments made from time to time.

So many defects have to be overlooked. Pure capitalism which was born in the 19th century has become an extent of the world economy.

In America, England, and many Western countries, capitalism economy are present now also.

Characteristics of Capitalism Economy

The main characteristics of capitalism economy system are:

1. Market imperfection

Perfect competition is not found in the modern capitalism system, So both the buyers and sellers find market Imperfection.

In the buyers’ attitude, we find Monopsony, divopsony, and Oligopsony are present and on the seller side, we find Monopoly, duopoly, and oligopoly system.

Product differentiation tradition pattern of advertisement is in invisible in perfect competition but visible in perfect imperfect competition.

2. Importance of Professional Management

The modern economy needs factors like large-scale production, knowledge of Technical know-how and efficient Management.

Which is present only in the modern capitalism economic system.

The drawback of this capitalism economic system was widening the gap between the owners of the concern and management of the concern and giving rise to monopoly.

Related: 21 Pros and Cons of Capitalism Economy (With Examples).

3. Existence of Labour Trade Unions

Economic and social exploitation of labour in the enterprises lead to the growth of the trade union.

Protecting the interests of labours and safeguarding them from the hands of capitalism were the main activities of the trade unions.

4. Importance of Public Utility Concerns

Public utility concerns are given the importance because serving the people is the social responsibility of the concerns.

Therefore, providing national security, basic infrastructural facilities and public services like electricity, L.P.G., telecommunication its necessary.

Related: 13 Characteristics of Socialism Economy (With Examples).

5. Expansion in the state control

Business is connected to society in various forms and Thus they should fulfil the obligation towards social responsibility.

A business owes the obligation of making plans for increasing production, distribution, consumption, saving, investment, employment, balanced regional development and overcoming the hurdles of the economy is the aim of modern capitalism economy/system.

6. Right of Private Property

Private ownership is the main component of capitalism economy.

Thus, every individual can have.

Right to hold and Freedom for the use of private property

The right of inheritance like the passing of the property inheritance to the coming generation.

Related: 15 Pros and Cons of Socialism Economy (With Examples).

7. Economic Freedom

The second important characteristic is the economic freedom which is enjoyed by the individual in the form of:

  • Free entrepreneurship
  • Freedom for entering into a contract and mutual agreement.
  • Right to use one’s own private property according to one’s will.

According to Robertson economic freedom includes:

  • Freedom of enterprise.
  • Freedom of contract.
  • The Freedom of selection.

Thus, in the capitalism economic system, there is no interference of the government in private ownership of the property and utilization of property.

8. Consumer’s Sovereignty

Consumers have the freedom for consumption according to their need, taste, and desire.

features of capitalist economy
features of capitalist economy

The consumer is the king of the market and thus production is done according to his will.

Manufacturing is done keeping in mind the consumption pattern of the consumers.

Related: 19 Features and Importance of Mixed Economy (With Examples).

9. Competition

There is competition present in the market among the buyers and sellers of the product.

Therefore, only efficient buyers and sellers are able to compare. Markets based on competition types.

10. Private Profit Motive

Under capitalism, profit motive acts as a basic yardstick of performance.

Profit-making is the heart of the economic activities undertaken in the capitalist society.

Private profit motive super-cedes the social serving motive of a firm.

11. Price Mechanism

Of all characteristics of capitalism economy, the economic activities of planning, coordination coordinating and controlling moves around the price mechanism.

Price mechanism works on the basis of what to produce, how to produce and for whom to produce.

All the decisions regarding savings, investment and consumption are also parts of the price mechanism.

12. Combination of Competition & Coordination

Capitalism economy is a combination of competition and coordination feeling is present on one hand leading to competition among the producers, sellers, consumers, And Labour and on the other side creating a feeling of co-ordinations among them.

Related: 8 Advanced Techniques of Motivation Research (Explained).

13. Inequality of wealth and distribution

Inequality of wealth and distribution creates the division among the individuals in the form of rich and poor, haves and have-nots.

14. Centralization

The centralization of wealth and economic power creates the feeling of suffering among the people.

15. Entrepreneurs Role

Entrepreneurs are the soul of capitalism economy and so they are very important.

In the capitalism economic system, the Entrepreneur who gets the risk is able to control the business so risk-taking and controlling go simultaneously.

Thus, now you know the major characteristics of capitalism economy.

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