Principles/Characteristics/Features of Capitalism

This most outstanding characteristic of capitalism is the freedom.Three basic freedoms of rights of capitalism are discussed below:

1. Private Property

     This means that individual a and business firms have the right to purchase, own, and sell property of all kinds, including land, building, machinery and equipment. The ownership of resources does not belong to the government.

2. Private Enterprise

     This means that businesses are owned and managed by the individuals who have invested their own funds in the business of their own choice from the operation of which they hope realize gains/ profits for themselves. Any person wishing to do legal business has right to form a company or partnership firm to start its activities.

3. Freedom of Choice

     It means that everyone has freedom of choice in his economic actions. A person may start any business of his choice within the legal boundaries. Thus the businessman is free to choose the land, capital, and management as he sees fit in order to achieve the highest degree of profit.

4. Voluntary Exchange 

     The buyers and sellers in capitalism are free to exchange the products in markets are the prices they think reasonable. Price is the amount of money for which a goods or service is exchange or sold. It is determined by demand and supply of various types of goods and services in the market. The government has no role in fixing the price of any product in the market.

5. Competition

     This means that the organizations in each line of business compete with each other in the sale of their products or services. Competition is the basic characteristics of capitalistic system. the level competition in a market can be high with many business trying to sell the similar type of products or it can low with only one or two businesses making that product.

6. Risk

     It refer to the chance of success or failure of a particular type of product in the market. The examples of risk are chances for loss through changes in prices level, changes in style and fashion, the appearance of similar products in the market. In capitalism, a person faces the risk of success or failure of a product.

7. Profit

     It is the excess of income of an enterprise over the cost of its operation. When, however, the income of a business is insufficient to cover its cost, there is loss. And entrepreneur accepts the risk of loss when he enters the business to earn profits. All the profit of a business is belong to its owners.