UGC NET COMMERCE July 2018 Q2
0. Which one of the following is not the characteristic of capitalism?
- A
Individuals and associations behave with economic motive of maximising their profit with least sacrifice or cost.
- B
The country’s major means of production are either owned by the Government or their use is controlled by the Government.
- C
Producers, consumers and employees compete among themselves, as the resources and opportunities are limited.
- D
Price, the invisible hand, plays a predominant role in the flow of the factors of production and consumption.
- Option : B
- Explanation : The main characteristics of capitalism are as follows:
∎ Two-class system: Historically a capitalist society was characterized by the split between two classes of individuals—the capitalist class, which owns the means for producing and distributing goods (the owners) and the working class, who sell their labour to the capitalist class in exchange for wages. The economy is run by the individuals (or corporations) who own and operate companies and make decisions as to the use of resources. But there exists a “division of labour” which allows for specialization, typically occurring through education and training, further breaking down the two class system into sub-classes (e.g., the middle class).
∎ Profit Motive: Companies exist to make a profit. The motive for all companies is to make and sell goods and services only for profits. Companies do not exist solely to satisfy people’s needs. Even though some goods or services may satisfy needs, they will only be available if the people have the resources to pay for them.
∎ Minimal Government Intervention: Capitalist societies believe markets should be left alone to operate without government intervention. However, a completely government-free capitalist society exists in theory, only. Even in the United States— the poster child for capitalism, the government regulates certain industries, such as the Dodd-Frank Act for financial institutions. By contrast, a purely capitalist society would allow the markets to set prices based on demand and supply for the purpose of making profits.
∎ Competition: True capitalism needs a competitive market. Without competition, monopolies exist, and instead of the market setting the prices, the seller is the price setter, which is against the conditions of capitalism.
∎ Willingness to Change: The last characteristic of capitalism is the ability to adapt and change. Technology has been a game changer in every society, and the willingness to allow change and adaptability of societies to improve inefficiencies within economic structures is a true characteristic.
