Question

Distinguish between Capitalist Economy and Socialist Economy.

Answer 1

 

Criteria	Capitalist Economy	Socialist Economy
Definition	A capitalist economy is one in which private firms control key production components such as labor, natural resources, and capital goods.	A socialist economy is one in which the government controls the elements of production such as labor, natural resources, and capital goods.
Determination of Price	Demand and supply forces determine the pricing of products and services in a capitalist economy.	The pricing of products and services is regulated and controlled by the government in a socialist economy.
Motive of Production	In a capitalist economy, the primary motivation for producing products and services is to make money.	In a socialist economy, the wellbeing of the general population is the primary motivation for creating commodities and services.
Role of Government	When it comes to the production and distribution of goods and services, the government plays a minimal or non-existent role in a capitalist economy.	The government has total control over the production and distribution of goods and services in a socialist economy.
Role of Private Sector	In a capitalist economy, the private sector totally controls the production and distribution of commodities and services.	In a socialist economy, the private sector has no involvement in the production and distribution of products and services.
Competition	In a capitalist economy, competition between different enterprises is a necessary component.	In a socialist economy, the government has no competitors.
Distribution of Income	In a capitalist economy, income distribution is uneven.	In a socialist economy, income distribution is more or less equal.