A capitalist economy is one where there is emphasis on private ownership of the means of production and capital goods. This economic system is also characterized by production of goods and services for profit in the market. Key features of the capitalistic economic model include accumulation of capital, competitive markets and wage labor. In this economic model, parties usually determine the prices of goods and services. It encompasses a limited role of government in the determination of prices or having control over the markets. Capital assets are owned by private persons with the gains accruing to the private owners.
On the other hand, a communist economic system is the mirror image of capitalism and entails a market where all or the majority of the means of production are owned and controlled by the state or the government. In this economic model, only a few of the means of production or assets are owned by private individuals. The communist economic model is characterized by collective ownership of property as well as organization of labor for the benefit of all the members of the society.
In a capitalistic economic model, price mechanism is of prime importance as it is used to allocate capital goods between users. As opposed to a communist system where prices of goods are set by the government or the state, in this economic system, prices are determined by the market forces. As such, competition plays a big role as far as the setting of prices is concerned in a capitalistic society. An example of a capitalistic economic model is the United States market system. Examples of communist systems are the Former Soviet Union or today’s Republic of China.
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Caplan, Byran. Communism. The Concise Encyclopedia of Economics. New York: Library of Economics and Liberty, 2008.
Fulcher, James. Capitalism A Very Short Introduction. Oxford: Oxford University Press, 2006.