Capitalism is an economic system in which capital goods are owned by private individuals or businesses. The production of goods and services is based on supply and demand in the general market. The purest form of capitalism is free market or laissez-faire capitalism, where private individuals are completely unrestrained in determining where to invest, what to produce or sell, and at which prices to exchange goods and services, operating without check or controls. Most modern countries practice a mixed capitalist system of some sort that includes government regulation of business and industry. How capitalism works is simply one process by which the problems of economic production and resource distribution might be resolved.
Individual firms have no control over prices when other firms sell identical or nearly identical products. All firms in a perfectly competitive market are “price takers”. Individual firms simply take the price determined by the market and produce the quantity of output, also determined by the market, which maximizes the firm’s profits. If a perfectly competitive firm attempted to
Apple introduces the most technologically advanced products before other companies can, giving them more business and establishing them as an innovator. These days, there are not many other places to go to buy a better product, so the consumer has to either buy iPhones at higher prices or do without them. There are few other competitors because of high barriers of entry. Since apple has so much market power and economy of scale, they can make almost a full profit on the selling price, making the company billions of dollars richer each year. SOURCES OF MARKET POWER 1.
Thus making it easier for many families to support themselves and unemployment was nonexistent. Fascist government also takes over the control of all foreign trade, wages and prices. Therefore nearly reducing all forms of inflation in an economic system. And since wages and prices are controlled, equality and self-sufficiency inside the country is achieved. Another positive outcome of fascism regarding the economy is the allowance of private enterprises.
The country has very few restrictions on investments and enforces no tariffs, however, there is a strong government intervention in macroeconomic management and major sectors like land, labour and capital resources. Both the government and the free market have a high degree of influence (Content, 2010). According to EconomyWatch (2010), Singapore has one of the most open and competitive economies in the world and ranked second on the World Bank Ease of doing Business Index in 2017. The unique combination of the free market system and government intervention developed in Singapore and dubbed the “Singapore Model”, has been highly successful and has seen the country attaining an AAA credit rating from all three major rating agencies, Standard & Poor’s, Moody’s and Fitch (Content,
Large companies are often able to under-cut competitors’ prices, drive them out of the market, and then raise prices again. Consequently, this increased volume increases profit, allowing such companies an even greater power. Technological superiority. As the production scale of a company increases they become better equipped to employ the use of superior technology, such as specialized labor or machines, which results in greater efficiency. No substitutes.
In addition, the government cannot intervene in any economic activity but only maintain law and order in the country. Capitalism also provides many incentives to consumers, producers and owners of economic resources to use the resources available to them as soon as possible. This situation is considered as economic efficiency because it refers to the full utilization of factors of production. According to Jain and Khanna (2006), mixed economic system is a synthesis of characteristics of both capitalism and socialism. Mixed economy has two main focused which are social welfare and government interference in economic activities.
Innovational models dies creative values and their products are generally cheaper than others like IKEA and are highly successful to innovative other existing models in the market. The key point is also that ZARA manage the strategy of distributions and vertical integrations also, while cutting cost as they do not out source. Also considering the fact that ZARA will not order new merchandise after a line is sold out , it forces the customers to purchase right away and do not wait for the discounts , is the leading way to generate the cash flow quickly. Also ZARA marketed research are interlinked and also inter dependent to each other in case of streamlining the product enhancements and product development through vertical and horizontal integrations. Also Zara business model is different from the others retailers as their each and every staff is fully motivated and enthusiastic , whilw giving them full out puts individually and Further zara’s factoties are based in europen regions so the time of new design to reach the customers are crossing the 2 weeks time , while other retailers are faced long time for the goods as the goods are coming from
Part 1 – Outline and explain what is meant by the term ‘a market economy’? Fully explain how such a market functions in theory and in practice. A market economy is a free market system. The decisions on production and consumption, resource allocation, and prices levels are all decided by a collective of self-interested individuals and organizations, rather than the government. Though the market is not entirely free, it is occasionally limited by government intervention.
It has lead to the market economy become not an option for a country to stay competitive. Competition in the marketplace provides the best possible product to the customer at the best price. When a new product is invented, it usually starts out at a high price, once it is in the market for a period of time, and other companies begin to copy it, the price goes down as new, similar products emerge.