Capitalistic economy has got the following characteristics:

Consumers sovereignty:

In the capitalist economy, consumer is the supreme. The industry produces those goods in sufficient quantity, which are demanded by the consumers. The increase in demand of a commodity induces the producer to produce that commodity.

Right to own private property


In case of capitalism every individual has right to own property in his own name. Law of inheritance is applied. After the death of the individual the property is passed on the legal inheritors. Individuals can also own sources of production.

Profit motive:

Every economic activity is aimed at earning more and more income. Business activities are carried on with a view to earn profit. As individuals are authorised to maximise their wealth, so they are always busy in acquiring more and more wealth. Profit motive leads towards achievement of this end.

Price mechanism:


Price of the commodity is not determined by the government. The government does not intervene in the determination of price. Forces of demand and supply act freely and the price is determined.

Perfect competition:

There are sufficient number of the buyers and sellers in the market, so the price tends to be normal. If price of a commodity falls, supply is reduced. With the reduction of supply the price again comes to the normal.