Comparative Economic Systems
Capitalism is the economic system found in the United States, Japan, and Germany that are based on private ownership of productive property. Items are known as productive since their use can produce other objects of economic value, income, or money. Things such as a worker’s tools, a farmer’s fields, or a factory’s machine can be considered as productive property.
The basic four factors of production that are important for any nation’s economy is land, human resource labor, management, and capital. Land sums up to a variety of economic uses for agriculture, mining, and forestry. Men and women who work in mines, factories, offices, hospitals, and other places all provide labor that’s essential to our nation’s economy. Management involves organizing other factors of production and making businesses run efficiently. Capital is a product of the economy that is then put back into the economy to make more products.
The United States economy is called capitalistic because it depends on the energy and drive of thousands of individual capitalist. Capitalist create and expand industries, make investments in new technologies, and engage in activities that create jobs and contribute to the high standards of living, by using their privately owned productive property.
In such a system individuals are free to start and run their own business; thus, they are also free to dissolve those businesses. However, this system is also known as a free enterprise
In a free enterprise system there are five noteworthy characteristics: private ownership, guarantees for property rights, decentralized decision making, competition, and freedom of choice. In a free enterprise most of the means of production are privately rather than publicly owned. A free enterprise system can work only when property rights are guaranteed. Therefore, no person may “be deprived of life, liberty, or property without due process of law.” Under capitalism, basic decisions about what to produce and how to produce it are left to private decision-makers. A person who takes the initiative and risk of starting or expanding a business is called an entrepreneur. Due to several people being free to enter a new business at any time, a number of companies usually offer the same product or service. Competition among multiple sellers helps to hold down prices and keep quality high, since customers are likely to buy from the company with the best product and lowest price. According to laws of supply and demand when supplies become more plentiful, prices tend to drop. Being that a firm is the only source of a product or service, it’s known as a monopoly. Monopolies can be very powerful due to the fact that they can charge as much as they want without any competition. Consumers can choose from a variety of products and services, entrepreneurs can switch from one business to another, and workers can quit their jobs and take new ones all has to do...