Q 1 Is capitalism the best economic system for the economic well-being of a country? In an essay no less than 800 words, explain your answer. Q 2 Fully explain how (a) price ceiling can cause a...

Q 1 Is capitalism the best economic system for the economic well-being of a country? In an essay no less than 800 words, explain your answer.

Q 2 Fully explain how (a) price ceiling can cause a shortage and (b) a price floor can cause a surplus.

Asked on by paki123

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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With regard to your first question, please note that we cannot write essays for students on this site.  We can provide you with help on how to answer a question, but we cannot write the essay for you.  Let us look at the basic pros and cons of capitalism.

Capitalism generally increases the overall wealth of a country.  Because it makes use of the profit motive, it gives people a strong incentive to work hard, to innovate, and to do other things that increase the economic health of a country.  Capitalism also helps the consumers.  In a capitalist system, companies try hard to give consumers the best possible products (and the widest variety of products) at the lowest possible price.  The firms know that they cannot make money unless they do this, so they try very hard to please the consumers.  Thus, we can see that capitalism ends up making the country as a whole richer and that it gives consumers the best possible deals.

However capitalism does have its faults.  The major fault is that it contributes to economic inequality.  In a capitalist system, some people can become poor while others become rich.  There are times when this is bad for the economy because too few of the people have too much of the wealth.  At its worst, inequality can cause conflict between rich and poor and can even destabilize an economy.  In order to write your essay, you will need to expand on these ideas.  You will then need to explain whether you think that the pros of capitalism outweigh the cons.

As to your second question, please consult the link below for a graph that can show you how price floors and ceilings cause surpluses and shortages, respectively.  When we put a price ceiling on a good, more consumers will want it because the price will go down.  At the same time, fewer producers will want to make it because there is less profit to be made at the lower price.  This causes a shortage.  With a price floor, there will be a surplus.  The price of the good is artificially increased and producers want to sell more so as to make more profit.  However, consumers want to buy less because of the higher price.  This causes a surplus to occur.

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