Question

Explain the four merits of the capitalist economy.

Answer 1

Following are the merits of capitalist economy:

• Efficient Production : Due to the motive of earning maximum profits and existence of absolute competition in the market, every entrepreneur tries to produce a better and more durable item as compared to another entrepreneur and uses ever-new techniques for this purpose. He also tries to minimise the the cost of production in order to maximise his profit. 
• Flexibility : Flexibility is an important characteristic of this type of economy. It has the capability of moulding itself in any way according to the need of time. 
• Development of the individual : Every individual makes efforts to increase his qualification and ability in this competitive market because success is attained by the best person in trade. 
• Automated : Price mechanism plays an important role in the working of this economy. There is no external interference in this economy.