CAPITALIST ECONOMIC SYSTEM

What is capitalism? How it works? How can it be possible that the US, Spain, China and others share the same economic system? 

The definition of capitalism is much more complex, but let's start with the basics: 

Capitalism is an economic system based on the private ownership of the means of production and their operation for profit and accumulation. The production of goods and services is based on supply and demand in the general market—known as a market economy—. 

Main characteristics of capitalism

• Making a profit is the goal for economic activity. 

• Private ownership of the factors/means of production (land, machinery, technology).

• Law of supply and demand determines the price of a product, capital, land and labour. According to this law, if a product is scarce its price will go up, whereas it will go down when there is more supply than demand.

• Following the law of supply and demand, it is needed a market or free competition.  Market or free competition arises when more than one producer is free to sell the same or similar products to the same buyers. However, monopolies or oligopolies can develop, especially if there is no competition. A monopoly occurs when a firm is granted exclusivity over a market. Hence, the firm can raise prices because it has no fear of competition. An oligopoly is a group of firms that act together in a monopolistic manner to control output and prices.

Activities:

1. Explain the law of supply and demand with examples. 

2. What is the difference between a monopoly and an oligopoly? Have you ever heard about monopolistic practices or oligopolies, can you put any examples?