C A P I TA L I S M

BY; AREIAH MASAURING

THE RISE OF CAPITALISM AND SOCIALISM

There were two competing economic models that

sprung up around the time of the Industrial
Revolution, as economic capital became more and
more important to the production of goods. These
were Capitalism and Socialism.
WHAT IS CAPITALISM?
• Capitalism is a system in which all natural resources and means of
production are privately owned. It emphasizes profit maximation
and competition as the main drivers for efficiency.
 The Invisible Hand Theory
• A theory originated from Adam Smith, an economist during the 1770’s.
• This idea is that if one leaves a capitalist economy alone, consumers will
regulate things themselves by selecting goods and services that provide
the best value.
• “Invisible Hand” refers to the invisible market force that brings a free
market to equilibrium with levels of supply and demand by actions of
self- interested individuals that bring a productive economy.
In practice, however, an economy does not work very well if it is left
completely on autopilot. There are many sectors where a hands-off approach
can lead to what economists call market failures, where an unregulated
market ends up allocating goods and services inefficiently. FOR
EXAMPLE;

Monopoly- a kind of market failure. When a company has no competition

for customers, it can charge higher prices without worrying about losing
customers.