The important features of capitalism are:
1. Competition and Free Trade:
Capitalism is a product of laissez-faire philosophy. Perfect competition and free trade are the twin pillars of this philosophy.
Since under perfect competition market price is determined by the forces of demand and supply and market price is equal to the minimum average costs of the optimum firm, no producer can hope to continue in business if it cannot achieve the maximum possible degree of efficiency.
In other words, capitalism ensures that the consumer gets the product he needs at the cheapest possible price. The doctrine of survival of the fittest operates ruthlessly and all inefficient firms must sooner or later go to the wall.
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Since the price system acts as an “invisible hand” for the allocation of resources, there is no need for intervention of any controlling authority.
2. Right to Private Property:
Another important feature of capitalism is the right to private property. The various means of production are under private ownership of individuals. Individuals can hold, use or sell them as they like.
3. Profit Motive:
Profit motive is at the heart of a capitalistic system. It is profit and not any altruistic feelings, which make an entrepreneur, invest in any economic activity.
4. Consumers’ Sovereignty:
In a free market economy the consumer is the king. The wishes and preferences of the consumer direct and determine the economic activities. The consumer occupies a key position in the economic system.