Economic System

And
Natural Monopoly
 TABLE OF CONTENTS

01 02 03 04

Capitalistic Socialistic Mixed Economy Natural

Economy Economy Monopoly
 1.
The Capitalistic
Economy
The capitalistic economic systems are based on the concept of free markets. In other
words, there is very little government interference. The government exercises little
control over resources, and it does not interfere with important segments of the economy.
Features of Capitalism
Economy
 Private Property.
 Right Of Inheritance.
 Freedom Of Enterprise and
Occupation
 Freedom Of Choice for
consumers.
 Price Mechanism.
 Competition.
 Profit Motive.
 Self- Interest.
 Minimum government
interference.
Merits of Capitalism
Economy
1. Spirit of enterprise.
2. Incentive for technologic
progress.
3. Efficient use of
resources.
4. Incentive for capital
formation.
5. New consumer goods.
6. Flexibility and
adaptability.
7. Automatic Working.
8. Economic Freedom
9. Increase in production
and standard of living.
10. Expansion of
Demerits of Capitalistic
Economy
1. Inequalities of income
and wealth.
2. Class Struggle.
3. Economic instability.
4. Misallocation of
resources.
5. Wastes of capitalist
production.
6. Emergence of monopoly
power.
7. Neglect of social welfare.
8. Domination of economic
values.
 2.
The Socialistic Economy

The socialist economy is defined as an economic system in which the production

are owned by the entire society and operated by public authority according to a
general economic plan for the benefit of Is defined as in which the means of
production are owned by the entire society and operated by the entire country.
Features of Socialism Merits of Socialism Demerits of Socialism

1. Better allocation of 1. Difficulties involved in

1. Socialistic ownership resources
of productive the rational allocation of
2. Fuller utilization of
resources. resources resources.
3. Elimination of economic 2. Loss of efficiency .
2. Economic Planning.
instability. 3. Loss of incentives.
3. Social welfare as 4. Equitable distribution of 4. Lots of consumers
motivating force. income sovereignty.
4. Economic activity. 5. Elimination of class struggle 5. Concentration of
6. Provision of Social Security
5. Classless Society. .
economic and political
6. Elimination of 7. Increase in productive power.
competition. efficiency . 6. Loopholes in the
8. Rapid economic growth. planning process.
9. More production of
necessity than social goods .
 Differences
Capitalistic Economy
1. Economic resources are
owned by private
individuals.
2. Producers, resource
owners and consumers are
free to take economic
decisions.
3. Price or market
mechanism is the basic
coordinating mechanism
4. Competition is an essential
part of a capitalistic
economy.
Socialistic Economy
1. All economic resources are
owned by the State.
2. There is loss of economic
freedom about consumers'
choices and allocation of
resources by individuals.
3. All important economic
decisions are taken by the
central planning authority.
4. Competition of all types is
eliminated in a socialistic
economy.
5. It is a state-regulated
economy.
 3.
The Mixed
Economic system
A mixed economy is an economy which combines the elements of both
the capitalistic and socialistic economy . Is an attempt to include the best
features of both the free enterprise economy and control socialistic
economy with a while excluding the demerits of both. Under a Mixed
Economy, the private and public sectors coexist.
 Features of Mixed Merits of Mixed Demerits of Mixed
Economy Economy Economy

1. Coexistence of public 1. Proper allocation of 1. Conflict between

and private sectors . resources public and
2. Coexistence of 2. Economic Stability. private sector.
capitalistic and 3. Advantages of market
2. Short lived
socialistic features. economy.
3. Economic planning . 4. Rapid economic nature.
4. Regulation and control development. 3. Inefficient
of the private sector. 5. Check on concentration operation.
5. Promotion of social of economic power.
4. Poor
welfare. 6. Economic and political
6. Role of price freedom. performance of
mechanism. the public sector.
7. Profit motive. 5. Excessive
8. Preservation of Regulations.
freedom.
 4.
Natural
Monopoly
What Is Natural Monopoly?
A natural monopoly is the type of
monopoly that occurs when an
industry’s high infrastructural
costs and other barriers make it
difficult for new firms to enter.
Sources Of Natural
Monopoly
The sources of monopoly power
include economies of scale,
locational advantages, high sunk
costs associated with entry, restricted
ownership of key inputs, and
government restrictions, such as
exclusive franchises, licensing and
certification requirements, and
patents.
How Does A Monopoly
Work?
• Monopolies occur when one business
retains the majority of a market's Government And Natural Monopoly
customers.
• In a monopoly, the seller has no The government allows natural
competition because they're the only
monopolies to exist but regulates
ones who provide what they're
offering. them to ensure fair pricing and
• This also occurs when there's no adequate services
available substitute for the product or A common carrier provides public
service. access to its services without
discriminating among customers..
Examples Of Natural Monopoly
• Telephone phone lines are natural
monopolies because the cost of
setting up and maintaining
transmission lines is quite high.
• Railways: Not only are their huge
capital costs in railways but there
are also limited resources in the
industry, making it a natural
monopoly.
THANK YOU
Presented By Aayat Farid
Department :Economics

CREDITS: This presentation template was created by

Slidesgo, including icons by Flaticon, and infographics
& images by Freepik.