Capitalism, planned economies and the concept of supply and demand
- Briefly describe and explain the key differences between capitalism and planned economies
- Explain the concept of supply and demand and describe how they can be used how prices are set in markets
Capitalism is characterized by a private enterprise system contrary to a planned economy which is based on the collective or governmental ownership by the means of production, that is to say that all the enterprises in the country are public. Capitalism is theoretically based on a pure and perfect competition whereas in a planned economy there is no competition because enterprises are monopolistic, since owned by the state. In a capitalist scheme, businesses make investments expecting profits.
[...] Explain the concept of supply and demand and describe how they can be used how prices are set in markets The supply can be defined as an amount of goods and services for sale at different prices whereas the demand can be defined as the willingness and ability of consumers to purchase goods and services at different prices. We can determine a demand curve which shows the amount of goods people are going to buy according to its price. Generally the demand curve slopes downwards because people are less willing to buy when the goods are more expensive: the more expensive the prices, the lower the demand. [...]