CAPITALISM OR FREE MARKET ECONOMY, Capitalism or free market may be defined as the type of economy in which the means of production and controlled by private individuals. In other words, it is the type of economic system which is characterized by private ownership of production.

In this case, private individuals play a greater role than government

decisions on what to produce how for whom to produce and the distribution has been produced. The private individual their capital and direct its use to make

Features of Capitalism or Free Economy

  • Private ownership of properties: There is a high degree of private ownership and control of means of production with minimal participation by the state.
  • Existence of competition: There is also a greater existence of competition among individuals and firms as a result of an effort to acquire wealth or control means of production.
  • Maximization of profits: Capitalism is characterized by a high level of profit maximization by private investors.
  • Individual satisfaction: Capitalism enables an individual to embark on ions for the least sacrifice that would give him the greatest amount of satisfaction
  • Free market enterprise: Capitalism gives individuals the freedom to choose their occupations based on their capabilities.
  • Production and consumption are regulated by a price system: The price system determines what producers have produced, taking into consideration the demand of the consumers and the price offered for the goods.
  • Accumulation of wealth: As a result of individual ownership of means of production, capitalism helps him accumulate wealth.
  • Exercise of the individual initiative:

Individuals are free to initiate their own kind of production of commodities that give them satisfaction and profits.

  • Economic activities are market-oriented: All economic activities in an effort to maximize profits are geared towards the market forces of demand and supply.
  • Freedom of choice: In a capitalist system, many commodities are arc-produced and these enable consumers to have a wide range of choices.
  • Free enterprise: Capitalism encourages maximum freedom of enterprise. People are not forced into a system, willy-nilly.
  • It encourages hard work: In capitalism, people are free to own property and this encourages hard work.
  •  It leads to specialization: Capitalism also boosts specialization due to the increasing and large-scale production of commodities.
  •  It encourages economic competition: As a result of individuals controlling the means of production, it generally leads to competition in the production of goods and services.
  •  It hastens economic development: The effort of many individuals in the production of goods and services generally leads to economic development in all sectors of the economy.
  •  Provision of alternative choice: The availability of goods and services produced by private individuals enables consumers to have a wide range of choices.

  •  It ensures self-regulation and reliance: Capitalism encourages individuals to regulate their economic activities as well as helps them to be self-reliant.
  •  It Promotes different forms of production: Individuals pursue different forms of production unlike when the state pursues a single form of production.
  •  It enhances technological development: The creativeness among private individuals coupled with the use of machines in production leads to technological development
  •  Talents are fully utilized: All known talents of private individuals are put in place during the process of production.
  •  It promotes a higher standard of living: The production of goods and services with competitive prices for them helps to raise the standard of living of the populace.

Disadvantages of Capitalism

  1. It creates monopoly: As a result of the economic activities of a few individual investors, monopoly can easily be created.
  2. It leads to economic inequality: Only few individuals have full control of the means of production and this can lead to inequality in the distribution of wealth.
  • Few individuals are enriched: In capitalism, only few individuals are enriched while many are poor.
  • It leads to economic exploitation: Exploitation of the majority by a few individuals is one of the problems of capitalism
  • It causes economic insecurity: Job insecurity and unemployment are some of the negative characteristics of capitalism
  • Unhealthy rivalry: As a result of competition in a capitalist economy, it does lead to unhealthy rivalry among investors/persons.

  • It increases crime rate: In an effort to acquire wealth at all cost, many embrace crimes
  • Profit maximization at all costs: In a capitalist economy, private individuals are interested in making a profit by all means.
  • It causes waste and inefficiency: Lots of wastes and inefficiency are recorded in a capitalist economy in an effort to produce goods and services.
pros and cons of capitalism

Capitalism is an economic system characterized by private ownership of the means of production and the free market exchange of goods and services. Here are some of the potential advantages and disadvantages of capitalism:


  1. Economic efficiency: Capitalism encourages competition and innovation, which can lead to more efficient production methods, higher productivity, and lower costs.
  2. Consumer sovereignty: In a capitalist economy, consumers have the freedom to choose the goods and services they want to buy, which can lead to more diverse and responsive markets.
  3. Incentives for innovation: Capitalism provides incentives for entrepreneurs and businesses to innovate and take risks in order to increase profits, which can lead to new technologies and products that benefit society.
  4. Higher standards of living: Capitalism has been associated with higher standards of living in many countries, due to the potential for economic growth and wealth creation.


  1. Income inequality: Capitalism can lead to significant income inequality, as some individuals and businesses accumulate more wealth and power than others.
  2. Exploitation: Some critics argue that capitalism can lead to the exploitation of workers and resources, as businesses seek to maximize profits without regard for the social and environmental consequences.
  3. Externalities: Capitalism may not account for the external costs of economic activity, such as pollution or resource depletion, which can lead to negative social and environmental impacts.
  4. Business cycles: Capitalism is prone to business cycles, with periods of economic growth followed by recessions or depressions, which can cause economic instability and uncertainty.

Overall, capitalism has its advantages and disadvantages. While it can promote economic growth and innovation, it also can create income inequality and social and environmental problems. As with any economic system, there are trade-offs and potential consequences to consider.

  1. loans for businesses
  2. how to establish enterprises
  3. what is a firm
  4. price equilibrium
  5. scale of preference
  6. concept of economics
  7. economic tools for nation building
  8. budgeting
  9. factors affecting the expansion of industries
  10. mineral resources and the mining industries


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