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Answer» The difference between capitalist and socialist economics is given below: | Capitalist Economy | Socialist Economy | | (i) Economic resources are owned by private individuals. The right to own private property exists. | All economic resources are owned by the State. The right to own private property is absent. | | (ii) Producers, resources owners and consumers are free to take economic decisions relating to production, allocation of resources and consumption respectively. | There is loss of economic freedom with regard to consumers’ choice and allocation of resources by individuals. | | (iii) Price mechanism is allowed to operate freely. | Price mechanism is not allowed to operate freely. | | (iv) Pricing or market mechanism is the basic coordinating mechanism. All economic decisions are taken through pricing mechanism. | Planning takes the place of market mechanism. All important economic decisions are taken by the central planning authority. | | (v) Maximization of profit is the principal objective of producers. | Maximization of social welfare is the chief motivating force behind all economic activities. | | (vi) Competition is an essential part of a capitalistic economy. | Competition of all types is eliminated in a socialistic economy. | | (vii)Minimum intervention by the government. | State regulated economy. | | (viii) Concentration of economic power in the hands of the capitalist class. | Concentration of economic and political power in the hands of the government. | | (ix) There exist large inequalities in the distribution of income and wealth. | It is based on the principle of egalitarianism. | | (x) There exists class struggle among various groups. | It aims at establishing a classless society. |
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