Merits/Advantages of Capitalism

by • 09/06/2011 • B.COM PART 1 Introduction to BusinessComments (0)784

Q 3-State merits and demerits of Capitalism.




1-   Minimum Government Interference:

In capitalism government’s inference us minimum. Businessmen have latitude to devising their own business policies, determining sources of capital and other funds, deciding on the type of business organization, choosing goods and services to be dealt in, working out number of employees to be hired, and fixing pay scales.


It is the result of abundant supply which is advantageous to both the country and the people. It results in better quality, natural prince level and optimum service to consumer. Surprisingly, competition expands producers market.

3-Investment Climate:

Under capitalism investment climate is created. People are free to do their business or invest their money in profitable projects. Capitalism affords maximum flow and opportunities or investment

4-Free Economy:

Economy is free and individuals can start their own business without government interference. Capital flows freely. Government restrictions on business are minimum. Entrepreneur can start their business as a sole proprietorship, a partnership, or a company

5-Consumer Status:

Consumer is the king under this system. He will buy at his price, time, and choice. He dictates the market

6- Survival Of The Fittest:

The system naturally encourages merit. Only those businessmen survive who can compete well with others. According to the Darwin Theory, is is the world where only the fittest and strongest will survive. If this principle is applied in business only that product will survive which is acceptable to the consumer. It gives rise to a philosophy that only the right product at right price, at the right time, at the right place offered to the right consumer will survive.

7-Professional Management:

Up until the middle of 20th century companies and businesses were run by family member mostly of them being unprofessional in countries having capital and mixed economy system

Companies in the private sector now prefer having MBAs having specialized in marketing, finance, management, and advertising. MBAs and CA s are considered as professional as doctors and engineers. Professionalism is always based on merit.

8- Natural Price Mechanism:

In capitalistic economy price mechanism is based on demand and supply. Prices are naturally fixed at a point where demand and supply lines intersect each other. When demand increases prices go high and the seller’s profit grows. The growth in profits attracts more producers and sellers increasing the supply.

The increase in supply releases the pressure on price and it comes down again.

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