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What are the major differences between capitalism, communism, and socialism - Essay Example

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This research is being carried out to discuss the three major economic indicators and how they are indicative of our current economic climate; identify the major strategies an entrepreneur may consider and discuss the advantages and disadvantages of each selection. …
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What are the major differences between capitalism, communism, and socialism
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What are the major differences between capitalism, communism, and socialism

Download file to see previous pages... It is evidently clear from the discussion that capitalism is a system of private enterprise in which the main economic decisions, such as what, how, how much, where, to whom and for what price several items are to be produced, are made by private individuals in their capacity as owners, workers or consumers. Capitalism is referred as free enterprise system as the basic economic decisions are not left to individuals but rather these decisions are also made in response to market forces such as demand and supply. According to the concepts of capitalism, people are free to accept the law of supply and demand. Communism is, according to its founder Karl Marx, an economic system that promotes the idea that the society must control the production or goods and services. Capitalism was much concerned about acquisition of wealth where as communism focused on serving others with concerns on poor and underprivileged arguing that there were major disparities between classes. Socialism is an economic system that seeks to manage the economy through collective social control, but communism is an economic system that seeks to manage the economy as well as society. McConnell and Brue noted that capitalism is a system in which each participant acts and performs business and non-business activities in his own self interest. Each individual is looking for maximizing his satisfaction or profits through own decisions regarding production and consumption. They pointed out that socialism and communism can be considered as command system as an alternative to market system. In both communism and socialism, government owns most of the property resources. The economic decision making in these systems occurs through a central economic plan Socialism and communism are similar in that both these dogmas are systems of production for use based on public ownership of the centralized planning. Communism is a further development or higher stage of socialism (Williamson, 2011, p. 47). 2. Discuss the three major economic indicators and how they are indicative of our current economic climate. The major three economic indicators are 1) Gross domestic product, 2) Consumer price Index, 3) Employment. The most important economic indicator is GDP- Gross Domestic Product- which represents the total market value of all final goods and services that are produced in a specific period of time. GDP includes all goods and services produced by citizen-supplied or foreign-supplied resources employed inside the country (McConnell and Brue, 2004, p. 113). Consumer Price Index is used as main measure of inflation in the United States as compiled by the Bureau of Labor Statistics. Consumer Price Index is considered as the base to report inflation rate each month and each year and also for adjusting social security benefits as well as income tax brackets for inflation (McConnell and Brue, 2004, p. 141). Another important economic indicator is Employment Statistics which provides a comprehensive data on national employment situations, unemployment rate, wage and earning data etc. Normally, information is disseminated from different ways such as agricultural, industrial, employment or unemployment among men, women or other classes etc. All these major economic indicators are clearly indicative of our current economic situations. For instance, the latest statistics show that there has been an expansion of 2.8 percent in the gross domestic product figure in the fourth quarter of 2011 over the previous quarter (tradingeconomics.com, 2012). Another example is that the unemployment rate in the United States has been decreased to 8.3 percent in January of 2012, showing a lowest rate from February of 2009 (tradingeconomics.com, 2012). 3. In considering to enter the global market, identify the major strategies an entrepreneur may ...Download file to see next pagesRead More
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