Capitalist Economy: Features and Drawbacks

Q. In a capitalist economy, economic decision-making happens through price mechanisms. Which of the following statements is true regarding price mechanism?

1. It refers to the intervention of the government in the economic decision-making of the country.
2. It refers to the system where the forces of demand and supply determine the prices of commodities and the changes therein.
3. It refers to the proactive role played by the central bank of the country in case of instability in the market in the presence of private companies.
4. It refers to the centralised plan of the government formulated to retain control over market forces.

Q.

Under a free economy, prices are

Q. Who owns and controls the means of production in a capitalist economy?

1. Government
2. Both public and private sector
3. Private sector
4. Public sector along with foreign investor

Q. List the features of a capitalist economy.

1. Profit motive
2. Centralised planning
3. Price mechanism
4. Presence of private ownership

Q. Accumulation of wealth is one of the major drawbacks of a capitalist economy.
How does this problem arise?

1. Due to the transfer of property to legal heirs
2. Due to the right to ownership of private property
3. Due to the equal distribution of wealth
4. Due to the idea of personal growth

Q. Which of the following situations would occur if the price of the pen that you had earlier purchased at Rs. 10 increases to Rs. 20?

1. Demand of the pen will increase.
2. Demand of the pen will decrease.
3. Producers will supply more pens.
4. Producers will supply less pens.

Q. How does the tendency of 'making profits only' adversely affect the economy?

1. People are motivated to work, which leads to efficiency.
2. The idea of profit maximisation brings innovation.
3. Competition among entrepreneurs increases, resulting in growth in economy.
4. Profit maximisation can lead to economic disparity.