Capitalism

 -  What is Capitalism?

After understanding business and its features, we need to understanding the overall economic environment in which a business operates. The three types of economic systems are described in the previous section of the unit. Among them, capitalism is the most business friendly system as it regards the business activities as the fundamental to the economic benefits of the society. The capitalism is an economic system in which the resources of a nation are owned by the persons. 

                      The United states, Canada, Australia and England are the examples of the capitalist system, but with some elements of the command system in government regulation and public ownership of some production facilities,such as public utilities and powder dams. The main task for the business organizations in capitalism is to arrange the factor of production and apply them to make the products. A brief description of these factors is given below:

 Factor of Production: (Inputs)

 Factor of production refer to the inputs which are required for making any product. The task of a business organization is to arrange a suitable quantity of these factor of production and then performing business processes to make a finished good. For examples, a person wants to make biscuits for which will require the following inputs:

 1. Capital

      It refer to the monetary and physical resources which a business requires to start its operations. It includes the initial amount invested by the owners of the business and the plant & machinery required for starting the production. It also includes any loan take from the purpose of investment in the business.

 2. Labour

      It  refers to the people working in a business to make different goods. The human being are required for the efficient operations of the business. The people working in a business organization are called employees.The owners of business provided wages to the employees.

 3. Land 

     It is defined as God-gifted resources which a business is required for performing its activities. These natural resources include land, water, air, trees, minerals etc. Land is given reward in the shape of rent.

4. Organization (Enterprise)

      This fourth factor that brings together the other three factor of production is called organization. The task of an organization is to arrange the required factors of production and then apply them in a correct balance to make the products. In capitalism, the organization is the main driver of the economic activities because it takes risk and generates the business idea for a particular product. Organization gets reward in the shape of profit.