Capitalism Is An Economic System Essay

1679 Words Mar 23rd, 2016 7 Pages
There has been unresolved conflict among various analysts over the case of capitalism in the country. These groups have failed to reach a common stand on the suitable form of economic system. Capitalism is an economic system where there is a lack of government intervention in the way of doing business. The means of production is owned by the private firms, which drives the economy of the country independently. In capitalism, the goods and services are distributed according to the price mechanisms in the market, meanwhile there is no government intervention in trade; the prices of the commodities are defined by the market forces since the government does not fix prices. According to Adam Smith, a capitalist economy operates with the help of "invisible hand" this is a theory lays emphasis on the fact that within the free market firm, products are exchanged at prices that are determined by the mutual consent of buyers and sellers in the market. The demands by consumers of a product will result in the allocation of the resources by the producer’s in order to achieve the consumers ' utility maximization. Capitalist economy will ensure that shortages and surplus production of goods will only last for a short time (Merino, 2008).
There are numerous advantages of capitalism in a country: First, there is economic freedom, which contributes immensely to the political freedom of the citizens. If the government own the means of production and control the prices of the commodity, then…

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