Definition of Capitalism and its basic features for BS Islamic studies course code 303 ?

 Definition of Capitalism and its basic features for BS Islamic studies course code 303 ?  

Capitalism

``Capitalism is an economic organization in which all domestic productive resources are the private property of individuals.Individuals use these resources according to thier own free will for the purpose of profit.´´

It was introduced in 1550.

Salient* *features* *of* *Capitalism

1* ) * *Private* *Property*

i)Private property is the base of this system.

ii)Owners are free to sell or transfer thier property.

iii)All productive resources are thier private property.

2*) ***Freedom* *Of* *Enterprise

i)Second main feature is the freedom of enterprise.

ii)Every person can choose the business according to his resources.

iii)He is free in making decisions about business.

3**) *Competition

i)Competition has very important place in Capitalism.

ii)Entrepreneurs compete with eachother to earn to earn profit.

iii) This is achived by lower price and high quality.

4**) *Price* *Mechanism

Basic economic problems such as allocation of resources,technique of production,and distribution of wealth are solved by price mechanism.

5* *) *Freedom* ***ofChoice*

Comsumers are free to spend thier wealth according to thier will.

6* *)* *Consumers* * *Sovereignty*

Capitalism accepts consumers sovereignty .All productive units ,shopkeeper,and importers try to provide the goods the consumers want to consume.His likes and dislikes play an important role in decision of production.

7* ) *Role* *of* *Government

Government imposes different restriction for the security of benefits of common mass.

8* ) *Price* *Motive

In Capitalism ,profit is of special intrest.Those goods are produced that earn maximum profit.

Merits* *of* *Capitalism

i) No resources gone waste due to the effective control.Every entrepreneur want to earn maximum profit. So , factors of production are fully utilized.

II)In order to attract consumers,quality of production is improved.Preference is given to consumers choice.

III)Each productive unit tries to produce the goods realizing the consumers taste.So,consumers soveriengty is recognized.

4) Due to competetion,prices are low and quality of goods are high.

Demerits* *of* *Capitalism

i)Moral values are destroyed because each producer tries to produce the goods by which he earns maximum profit irrespective of harmfulnes or usefulness of goods produced.

ii)Each entrepreneurs tries to get rid of small entrepreneurs by adopting various tactics.Afterthat he charges high prices for low standard goods.

iii)In capitalism ,

producers fail to coordinate b/w supply and demand.As a result,employment is affected.

iv)Property rights are given importance over human rights.It is insult of human race

Scarcity

Scarcity means people don't have as much as they want to have.

It is a relative term.It changes with time and space.

For example:Wheat is not scarce for a person living in rural area but it may be scarce for a person living in urban area.It changes with time and space.Price is test for sarcity check.

Scarcity is due to two condition:

i)Physical condition

ii)Mental condition

aAll economic resources are scare or limited.Economist broadly classify such resources as :

i-Property resources (land and raw material)

ii-Human resources(labour and entrepreneurial abaility)