What is a Free or Capitalist Economic System?

What is a Free or Capitalist Economic System?

Free or capitalist economic system may be defined as one in which all or most means of production are owned and controlled by private individuals and in which the economic activity of the government is at a minimum. In this type of economic system, private individuals play greater role than the government in taking decisions on what, how to produce and the distribution of what has been produced. Private individuals who have the economic wherewithal participate in all sectors of the economy.

In the real sense, the pure market capitalist economy being characterised by the private ownership of all the means of production and distribution does not really exist. Nearly all the so-called First World or developed nations of the world such as, Japan, North America, New Zealand, Western Europe, Australia, Israel, etc, adopted the free or capitalist economic system. In these countries, profit is the main motive for either the private or the state participation in the production of goods and services. Resources are allocated according to price signals in these capitalist countries.

Also read:  What is Scarcity?

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