(a) Outline two feature each of:
(i) capitalist economic system;
(ii) socialist economic system.
(b) Explain any four weaknesses of capitalist economic system.
Explanation
(a) Features of capitalist economic system;
(i) Private ownership of the means of production and properties.
(ii) Decisions on what to produce, how to produce etc. are taken by private individuals.
(iii) Allocation of productive resources is done by the price mechanism.
(iv) Distribution of consumer goods is done on the basis of the price mechanism.
(v) The profit motive is the driving force behind production.
(vi) Prices of goods and services are determined by market forces.
(vii) Consumer sovereignty exists in the capitalist system.
(viii) There is limited government intervention.
(ix) There is competition among individuals and firms in an effort to acquire wealth.
Features of socialist economic system
(i) The means of production is owned by the state.
(ii) Decisions on what to produce, how to produce etc. are taken by a planning body on behalf of the government.
(iii) The aim of production is not for profit but to maximize public welfare.
(iv) Prices are fixed by a planning body.
(v) Allocation of productive resources is done by the state.
(vi) Distribution of goods is based on need and rationing.
(vii) Consumer choices are limited in socialist system.
(viii) Dominant government influence and control.
(ix) There is no competition since government controls resources.
(b) weaknesses of capitalist economic system
(i) The price system may lead to a misallocation of resources where goods demanded by the rich are mainly produced.
(ii) The income gap between the rich and the poor widens.
(iii) The system does not promote the production of public goods. e.g. public utilities
(iv) The system may result in wastage and inefficient use of resources due to unhealthy competition.
(v) The system can lead to the exploitation of consumers as in monopoly and oligopoly.
(vi) The profit motive may result in private benefits at the expense of public welfare.
(vii) The system can cause unemployment due to the profit motive.
(viii) The system is more prone to economic instability since decisions are made by private individuals.