Competition

Competition among sellers and buyers is an essential feature of an ideal capitalist system. Competitions reduce market imperfections and associated problems. Therefore, in a free market economy, “a sufficient amount of competition is considered necessary if the whole production and distribution process is to be regulated by market forces. Competitions on alert, to protect the consumer, and to maintain a sufficiently flexible price system.

Absence of a Central Plan:

As is clear form the feature mentioned above, the capitalist system is essentially characteristics by the absence of central plan. That is, the activities of the numerous economic units in a capitalist system are not guided, co – ordinate or controlled by a central plan. Freedom of enterprise, occupation and property rights rule out the possibility of a central plan. Resources allocation and investment decisions in a free market economy are influenced by market forces rather than by the state.

Limited Role of Government:

The absence of a central plan does not mean that the Government does not plan nay role in a private enterprise economy, Indeed, Government interference is necessary to define and protect property rights, ensure freedom of entry and exist, enforce contractual agreements among private entrepreneurs, ensure the satisfaction of certain community wants, etc. However, Government interference in the system is comparatively very limited.

The Pure capitalist system which has been described above is a highly idealized system. There is hardly any pure capitalist or free enterprise system in the real world today. The capitalist economics is today are characterized by State regulation in varying degrees.