The Role of Capitalism in Corporate Decision Making

The role of capitalism
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Definition of capitalism and socialism
Capitalism and socialism are examples of developmental theories discovered by superpower nations to improve commercial activities. Capitalism is an economic system where production is possessed and operated by private entities or people. Under capitalism, the volume of products and services produced is influenced by forces of supply and demand. The capitalist economy enjoys a high level of market incentives due to individual private ownership, which eventually encourages firms to cut costs in their entailed activities. In the capitalist economy, the price of products is ascertained by demand and supply curves when the demand for a product is higher than the supply, the price increases.
On the other hand, socialism is a political and economic system where the public owns and operates the means of production. Under socialism, the government controls the volume of production and the prices of products based on people's needs. The socialist economy involves the government intervention in the reallocation of resources a great deal. The government is expected to do this in an egalitarian way. In the socialist economy, the government owns the firms, thus leading to fewer market incentives. The price control systems in the socialist economies are used to allocate prices to the respective products. These products are then distributed to the consumers in the market.
Pros and cons of capitalism
The main pro of capitalism is that it provides incentives to firms to improve and innovate. The competition caused by innovation among firms leads to e...